Franklin Templeton Mutual Fund

Transcription

1 Franklin Templeton Mutual Fund Dear Investor, The Board of Directors of Franklin Templeton Trustee Services Pvt. Ltd., Trustee to Franklin Templeton Mutual Fund, have the pleasure of presenting before you the Nineteenth Annual Report of Franklin Templeton Mutual Fund for the financial year (FY15). Along with the general information on the background and highlights of Franklin Templeton Mutual Fund, investor services, etc., the Board of Directors of Franklin Templeton Trustee Services Pvt. Ltd. have specifically provided information on the schemes of Franklin Templeton Mutual Fund. Brief background of Trust, Sponsor, Trustee Company and Asset Management Company: Franklin Templeton Mutual Fund Franklin Templeton Mutual Fund ( FTMF / Mutual Fund ) has been constituted as a Trust on January 04, 1996 in accordance with the provisions of the Indian Trusts Act, 1882 and the Deed of Trust is registered under the Indian Registration Act, FTMF has been sponsored by Templeton International Inc. (liability restricted to the seed corpus of INR l lakh) with Franklin Templeton Trustee Services Pvt. Ltd. as the Trustee. Franklin Templeton Trustee Services Pvt. Ltd. has entered into an Investment Management Agreement dated January 05, 1996 with Franklin Templeton Asset Management (India) Pvt. Ltd. appointing it as the Investment Manager for all the schemes of FTMF. FTMF is registered with SEBI vide Registration No. MF/026/96/8 dated February 19, Templeton International Inc. Templeton International Inc. is a part of the Franklin Templeton Group, which is one of the world s largest investment managers with USD bn in assets under management and around 24.8 million Shareholder Accounts as at March 31, Franklin Templeton has offices in over 30 countries including the United States of America, Bahamas, Canada, Argentina, France, Germany, Italy, Luxembourg, Poland, Russia, the United Kingdom, Hong Kong, Singapore, South Korea, India, China, UAE, Malaysia, Japan, Australia and South Africa. Franklin Templeton Trustee Services Pvt. Ltd. Franklin Templeton Trustee Services Pvt. Ltd. ( Trustee / Trustee Company ), a company incorporated under the Companies Act, 1956 and having its registered office at Indiabulls Finance Center, Tower 2, 12 th and 13 th Floor, Senapati Bapat Marg, Elphinstone (West), Mumbai is the Trustee to FTMF. The Trustee ensures that FTMF and the schemes floated thereunder are managed by the investment manager in accordance with the Trust Deed, SEBI (Mutual Funds) Regulations, 1996 (the Regulations), directions and guidelines issued by SEBI, the stock exchanges and other regulatory agencies. Board of Directors of the Trustee Company: Mr. Vivek Kudva (Associate Director) Mr. Anand J. Vashi (Independent Director) Mr. Percy J. Pardiwalla (Independent Director) Dr. Indu Shahani (Independent Director)

2 During the year, Mr. Gregory E. McGowan and Mr. Stephen Dover resigned from the Board of Directors of the Trustee Company. The Board of Directors of the Trustee Company would like to thank them for their continued support as members of the Board. Mr. Vivek Kudva was appointed as a director on the Board of the Trustee Company. Franklin Templeton Asset Management (India) Pvt. Ltd. Franklin Templeton Asset Management (India) Pvt. Ltd. ( AMC /FTAMIL ), a company incorporated under the Companies Act, 1956 and having its registered office at Indiabulls Finance Center, Tower 2, 12 th and 13 th Floor, Senapati Bapat Marg, Elphinstone (West), Mumbai is the Investment Manager of FTMF. The investment manager is approved by SEBI to act as the asset management company of FTMF vide letter No. IIMARP/406/96 dated February 19, Board of Directors of the AMC: Mr. Vijay C. Advani (Associate Director) Mr. Deepak M. Satwalekar (Independent Director) Mr. Navroz Seervai (Independent Director) Mr. M.B.N. Rao (Independent Director) Mr. Harshendu Bindal (Associate Director) Mr. S. Jayaram (Associate Director) During the year, Dr. J. Mark Mobius, Mr. Jed Plafker (Alternate Director to Dr. J. Mark Mobius) and Mr. Vivek Kudva resigned from the Board of Directors of the AMC. The Board of Directors of the AMC would like to thank them for their continued support and years of commitment during their tenure as members of the Board. Mr. Harshendu Bindal and Mr. S. Jayaram were appointed as Directors on the Board of the AMC. Review of activities of Franklin Templeton Mutual Fund: During the year under review, the mutual fund industry saw substantial increase in inflows compared to previous year. The average assets under management (AAUM) at the industry level also increased on account of value appreciation. New product launches: During the year, three new schemes were launched by FTMF. Franklin India Banking & PSU Debt Fund, an open end income fund was launched on April 02, The scheme seeks to provide regular income through a portfolio of debt and money market instruments consisting predominantly of securities issued by entities such as Banks and Public Sector Undertakings (PSUs). The scheme mobilized subscriptions for more than INR 91 crores during the new fund offer period and the average assets under management as at May 31, 2015 stood at INR crores. Franklin India Feeder - Franklin European Growth Fund, an open end fund of funds scheme investing overseas, was launched on April 24, The scheme seeks to provide capital appreciation by investing predominantly in units of Franklin European Growth Fund, an overseas equity fund which primarily invests in securities of issuers incorporated or having their principal business in European countries. The scheme mobilized subscriptions for more than INR 59 crores during the new fund offer period and the average assets under management as at May 31, 2015 stood at INR crores. Franklin India Multi-Asset Solution Fund, an open end fund of funds scheme was launched on November 07, The scheme seeks to achieve capital appreciation and diversification through a mix of strategic and tactical allocation to various asset classes such as equity, debt, gold and cash by investing in funds investing in these asset classes. The scheme mobilized subscriptions for more than INR 123 crores during the new fund offer period and the average 2

3 assets under management as at May 31, 2015 stood at INR crores. Product rationalization: FTMF s constant endeavour has been to align products and services in line with changing investor preferences. Product offerings are regularly reviewed to assess their viability and scalability. As a part of the product rationalization exercise during the year, asset allocation pattern of a scheme was changed and mergers of few schemes were carried out. Asset allocation pattern of Franklin India Dynamic PE Ratio Fund of Funds was changed to allow greater flexibility in managing volatility of interest rates. Further, alternative underlying schemes were also included in the asset allocation pattern of the scheme. In order to provide greater operational efficiencies and create an optimal asset size towards better fund management opportunities benefitting the unitholders, following mergers were carried out during the year: Franklin India Government Securities Fund - Treasury Plan was merged into Franklin India Government Securities Fund - Composite Plan Templeton India Children s Asset Plan - Education Plan was merged into Franklin India Monthly Income Plan Templeton India Children s Asset Plan - Gift Plan was merged into Franklin India Balanced Fund Franklin India Index Fund - BSE Sensex Plan was merged into Franklin India Index Fund - NSE Nifty Plan During FY15, Franklin Templeton Mutual Fund saw a good progress in terms of investment performance, investor communication and product innovation. The firm continuously aims to deliver consistent long term performance. The total assets under management (AUM) grew by 44.3% in FY15, as against industry growth of 31.3% over the same period. The growth in AUM of schemes of Franklin Templeton Mutual Fund has been driven by growth in equity and income schemes. (AUM Source: AMFI website) Key Investor Education & Awareness Initiatives undertaken during FY15: Franklin Templeton Academy: An extensive digital marketing plan was undertaken to promote the investor section of the Franklin Templeton Academy (FTA) website ( Twenty two (22) animated videos followed by a quiz were uploaded on various forums. These videos received 0.73 million views during the FY15. Fundtastic Cup: A cricket themed online quiz game aimed at educating public at large on investments and mutual funds was launched in July The game was played over a period of 6 months and garnered over 108,000 registrations. The game has won numerous awards for innovation in marketing both at a national and international level. Webinar series with Economic Times: As part of our Investor Awareness Initiative, webinar series called Investments Simplified in association with was launched in December A series of 4 webinars were initiated with an objective to educate existing and potential mutual fund investors. Each webinar was a minutes presentation hosted by a subject expert from Franklin Templeton and was followed by a question and answer session. 3

4 On ground Investor Education meets: More than 700 investor education seminars were conducted since June 2014 to connect with employees from corporates and college students. About 26,500 people attended these seminars. On-ground programs were followed by continuous education through s. District Adoption Program (DAP): As part of the DAP project to reach out and develop under-penetrated markets, Investor Education and Awareness programs were held in the 10 districts adopted by Franklin Templeton. The project branded Shubh Laabh has seen us co-partner with various distributors to reach out to potential investors of mutual funds in a bid to promote the concept of investing. 135 investor meets covering over 4,200 attendees were conducted till March 31, This was followed with s on investor education to the attendees to keep them engaged. Scheme performance, future outlook and operations of the schemes: Brief commentary on the schemes, one year and since inception performance vis-à-vis benchmarks, future outlook of the Fund and operations of the schemes are given in Annexure I to this Report. Investor Services: As on March 31, 2015, the Mutual Fund served nearly 20 lakh active investor accounts through its 34 branches and 120 offices of our collection partners across India. We continue leveraging technology to provide enhanced customer and distributor satisfaction: Launch of Imaging and Workflow, an image based transaction processing system Launch of Kiosks as part of our direct customer engagement strategy where investors can seek help from our team by connecting through videoconferencing and also view fund manager videos Regular customer experience surveys to gauge investor experience and take appropriate actions for continuous improvement Further, in the interest of all stakeholders, various initiatives were taken to reduce cost through effective utilisation of infrastructure and resources. During the year, AMC also entered into an agreement with MF Utilities India Private Limited (MFUI), for usage of MF Utility (MFU) - a shared services initiative of various asset management companies, which acts as a transaction aggregator for transacting in multiple schemes of various mutual funds with a single form and a single payment instrument. Investors can now transact in schemes of Franklin Templeton Mutual Fund through MFUI authorized Points of Services also. Investor Complaints Report: The Investor Complaints Report of FTMF for FY15 is given in Annexure II to this Report. Valuation policy: 4

5 Valuation policy and related disclosures are available on our website for reference of the investors. Responsibility of the Trustees: The Trustee is the exclusive owner of the trust fund and holds the same in trust for the benefit of the unitholders. The Trustee has been discharging its duties and carrying out the responsibilities as provided in the Regulations and the Trust Deed. The Trustee seeks to ensure that the Mutual Fund and the schemes floated there under are managed by the AMC in accordance with the Trust Deed, the Regulations, directions and guidelines issued by the SEBI, the stock exchanges, the Association of Mutual Funds in India, other regulatory agencies and the Scheme Information Documents of the respective schemes. The Balance Sheet of schemes of FTMF as on March 31, 2015, the Revenue Account for FY15 and the Auditors Report thereon are annexed to this Report. As mentioned in the Auditors Report the accounting policies are in accordance with the Regulations. Investment objectives of the schemes: The investment objectives of the schemes of FTMF and related risk factors are given in Annexure III to this Report. Unclaimed dividends and redemptions of more than 90 days as on March 31, 2015: The data on unclaimed dividends and redemptions for more than 90 days as on March 31, 2015 is given in Annexure IV to this Report. Disclosures of Votes Cast: Please refer to Annexure V for the summary of proxy votes cast by FTAMIL during FY15. M/s Nipun Sudhir & Associates, Chartered Accountants have independently verified and issued an unqualified certificate regarding the report on the votes cast by FTAMIL. A copy of the same is available on the website of the mutual fund Statutory Information: The Sponsor, Templeton International Inc. is not responsible or liable for any loss resulting from the operation of the schemes of the Mutual Fund beyond its initial contribution of INR 1 lakh for setting up the Mutual Fund, and such other accretions/additions to the same. In view of the fact that the amounts collected under the various schemes are deployed in securities markets, the price and redemption value of the units, and income from them, can go up as well as down with the fluctuations in the market value of its underlying investments. Full Annual Report is available on the website of the mutual fund and shall be made available for inspection at its head office. Present and prospective investors can request for copies of the Trust Deed, detailed annual accounts of the schemes and of the AMC upon payment of the prescribed fee. Acknowledgments: 5

6 The Board of Directors of Trustee Company wish to place on record their appreciation for the dedication and sincerity of the employees of the AMC and Trustee Company. The Board would also like to thank the Government of India, the Securities and Exchange Board of India, the Reserve Bank of India and the Association of Mutual Funds in India for their ongoing support, co-operation and guidance during the year under review. The Board would like to take this opportunity to thank its family of investors for their confidence and wholehearted faith reposed in the Franklin Templeton Mutual Fund. In addition, the Trustee Company would also like to thank the Auditors, Custodians, Bankers, Registrar, and all other service providers for their valuable support. We look forward to your continued support and assure you of our commitment to quality products and services from Franklin Templeton Mutual Fund. Yours sincerely, for Franklin Templeton Trustee Services Private Limited (Trustee to Franklin Templeton Mutual Fund) Sd/- Vivek Kudva Director Date: July 06,

7 Annexure I Performance, future outlook and operations of the schemes Franklin India Prima Plus Launched in Sep 1994, Franklin India Prima Plus (FIPP) is a diversified equity fund with a mandate to invest in wealth creating companies whose competitive advantages we believe will translate into superior return on capital. The portfolio comprises mainly of large cap stocks with some exposure to mid and small cap stocks. The fund utilizes a bottom-up approach to stock picking and to that end the portfolio management team conducts in-depth research/analysis of companies before investing. Given below is the summary of returns delivered by the fund since inception and last 1 year along with the benchmarks: FIPP - Growth 53.17% 20.29% B: CNX % 9.48% AB: CNX Nifty 26.65% 9.53% FIPP - Direct - Growth 54.47% 29.02% B: CNX % 18.30% AB: CNX Nifty 26.65% 17.17% *compounded and annualized returns. Inception date: FIPP - Growth: September 29, 1994, FIPP- Direct- Growth: January 1, B: Benchmark, AB: Additional Benchmark During the year the fund outperformed its benchmark and the additional benchmark by a substantial margin. On an absolute basis, financials and industrials were the top contributors to the fund performance. Financial sector benefited from sustained drop in inflation and anticipation of softer interest rates regime on the back of two surprise rate cuts by RBI in the last quarter of FY15. Meanwhile expectations of revival of investment cycle augured well for companies in the industrials sector. As all the sectors closed the year in green, there were no detractors on an absolute basis. Looking ahead, the fund will continue to seek out well-run firms that have clear and sustainable business models backed by solid finances and a healthy regard for minority shareholders. Franklin Build India Fund Franklin Build India Fund (FBIF) is an open-end equity fund that seeks to provide long term appreciation by investing in companies that are taking advantage of multiple development themes in the Indian economy viz., infrastructure, resources, financial services, social development and agriculture. The fund combines a bottom-up approach for security selection with a top-down sector views. Given below is the summary of returns delivered by the fund since inception and last 1 year along with the benchmarks: FBIF - Growth 84.95% 21.37% B: CNX % 11.33% AB: CNX Nifty 26.65% 11.28% FBIF - Direct - Growth 86.81% 42.21% B: CNX % 18.30% AB: CNX Nifty 26.65% 17.17% *compounded and annualized returns. Inception date: FBIF - Growth: September 4, 2009, FBIF- Direct- Growth: January 1, B: Benchmark, AB: Additional Benchmark 7

8 Indian equity markets had a landmark year and ended FY15 with highest gains over last five years. The rally which began on the anticipation of a stable government was boosted by a decisive victory in central elections, resulting in a stable government with focus on economic growth and development. Additionally, favorable developments on the macroeconomic front such as substantial fall in both CPI and WPI inflation levels and significant fall in current account deficit, coupled with a steep fall in global crude oil prices and large foreign inflows supported the overall market momentum. The government seems to be focused on improving the infrastructure sector and has laid out various measures in the Union Budget FY16 which include: a significant outlay on roads and railways, higher public investment in the sector and tax free infrastructure bonds in order to boost the sector. We believe these measures if implemented could have a ripple effect across other allied sectors. In line with the fund s investment focus, our endeavor would be to invest in companies that are likely to benefit from investment in the building blocks of the economy and have an attractive risk/reward profile. Franklin India Bluechip Fund Launched in 1993, Franklin India Bluechip Fund (FIBCF) is an open-end fund primarily investing in large-cap stocks. The fund follows a bottom-up approach to stock selection based on fundamental research with a medium to long term perspective. The evaluation of individual businesses is not restricted to only quantitative parameters, but qualitative factors such as competitive strategy, business objectives etc. are also analyzed. Given below is the summary of returns delivered by the fund since inception and last 1 year along with the benchmarks: FIBCF - Growth 36.28% 23.16% B: S&P BSE Sensex 24.89% 10.54% AB: CNX Nifty 26.65% 10.50% FIBCF - Direct - Growth 37.41% 20.45% B: S&P BSE Sensex 24.89% 17.20% AB: CNX Nifty 26.65% 17.17% *compounded and annualized returns. Inception date: FIBCF - Growth: December 1, 1993, FIBCF - Direct- Growth: January 1, B: Benchmark, AB: Additional Benchmark Our endeavor to focus on quality stocks helped the fund outperform both its benchmark and the additional benchmark in the last fiscal. On an absolute basis, financials and IT were the top contributors. Financial sector benefited from sustained drop in inflation and anticipation of softer interest rates regime on the back of two surprise rate cuts by RBI in the last quarter of FY15. As all the sectors closed the year in green, there were no detractors on an absolute basis. Looking ahead, our strategy would be to continue focusing on identifying medium to long term opportunities. While this may impact relative performance over the near term, however this approach should benefit us over the medium to long term. Franklin India Taxshield Launched in April 1999, Franklin India Taxshield (FIT) is an equity linked savings scheme that seeks to provide medium to long term capital appreciation along with income tax rebate under Section 80C of the Income Tax Act, The fund has the flexibility to invest across sectors and market capitalization. 8

9 The fund managers aim to create a diversified equity portfolio and the approach taken is to build a core large-cap exposure and selectively add quality companies from the mid & small cap segment. In terms of style, the team utilizes a combination of Growth and Value approach to stock picking and has a long term outlook. Given below is the summary of returns delivered by the fund since inception and last 1 year along with the benchmarks: FIT - Growth 52.92% 26.43% B: CNX % 15.53% AB: CNX Nifty 26.65% 14.37% FIT - Direct - Growth 54.05% 29.21% B: CNX % 18.30% AB: CNX Nifty 26.65% 17.17% *compounded and annualized returns. Inception date: FIT - Growth: April 10, 1999, FIT - Direct- Growth: January 1, B: Benchmark, AB: Additional Benchmark Over the last year, at a sector level, on an absolute basis, financials and industrials were the top contributors to the fund performance. Financial sector benefited from sustained drop in inflation and anticipation of softer interest rates regime on the back of two surprise rate cuts by RBI in the last quarter of FY15. Meanwhile expectations of revival of investment cycle augured well for companies in the industrials sector. As all the sectors closed the year in green, there were no detractors on an absolute basis. Going forward, the fund will continue to focus on delivering long term growth through investments in businesses that we believe are high quality and trading at attractive valuations. Franklin India Dynamic PE Ratio Fund of Funds Franklin India Dynamic PE Ratio Fund of Funds (FIDPEF) is an open-end hybrid fund of fund that allocates funds between equity and debt asset class based on the movement in the weighted average PE ratio of the CNX Nifty index. The fund comes with a pre-defined re-balancing mechanism that ensures that the scheme holds less equity when the markets are overvalued and vice-versa, using the PE levels of the market as a barometer. This approach ensures that the scheme pares its equity exposure when the markets are ruling high. At lower PE levels (i.e. when markets are down), the fund increases its equity exposure to take advantage of the attractive valuations. Thus, when the markets rise, a fully invested portfolio is well positioned to turn in a good performance. The table below provides an insight into how the asset allocation works - If weighted average PE ratio of NSE Nifty falls in this band the equity component will be % and the debt component will be % Upto Above The fund managers may, at their discretion, change the allocation pattern depending upon their assessment of the markets. 9

10 Given below is the summary of returns delivered by the fund since inception and last 1 year along with the benchmarks: FIDPEF - Growth 24.16% 17.25% B: S&P BSE Sensex 25.15% 16.46% B: Crisil Balanced Fund Index 22.66% 12.98% FIDPEF - Direct - Growth 25.23% 14.80% B: S&P BSE Sensex 25.15% 17.20% B: Crisil Balanced Fund Index 22.66% 14.59% AB Not Applicable Not Applicable *compounded and annualized returns. Inception date: FIDPEF - Growth: October 31, 2003, FIDPEF - Direct- Growth: January 1, B: Benchmark, AB: Additional Benchmark At end of March 2015, 55% of the fund s assets were invested in equity fund and the remainder in debt fund. Franklin India Pension Plan Franklin India Pension Plan (FIPEP) is an open-end hybrid product designed to cater to pension needs of investors. Investments in the fund are eligible for tax benefits under the Section 80C of the Income Tax Act. The fund invests predominantly in high quality fixed income securities and takes some exposure to equities (capped at 40%) that helps enhance returns over the longer timeframe. The equity portion of the scheme is invested in a diversified portfolio of stocks with pre-dominant exposure to large caps. The below table captures the returns of the fund since inception and for last one year: FIPEP - Growth 32.34% 13.52% Benchmark** 22.05% N.A. Additional Benchmark: Crisil 10 Year Gilt Index 14.57% N.A. FIPEP - Direct - Growth 33.13% 18.16% Benchmark** 22.05% 12.96% Additional Benchmark: Crisil 10 Year Gilt Index 14.57% 6.82% **40% CNX % CRISIL Composite Bond Fund Index; *compounded and annualized returns. Inception date: FIPEP - Growth: March 31, 1997, FIPEP - Direct - Growth: January 1, At end of March 2015, about 40% of fund assets were invested in equities. Top sectoral allocations were to banks, software and pharmaceuticals. On the fixed income side, about 45% of the exposure was to Government of India securities and the remaining to AA- or higher rated corporate papers. The average maturity of the debt portfolio was increased in order to take advantage higher yields on government securities (G Sec yields had sharp spikes during the period under review). At the end of the year, the portfolio s average maturity was years and Yield-to-Maturity (pre-expenses) stood at 8.23%. Franklin India Life Stage Fund of Funds Franklin India Life Stage Fund of Funds (FILSF) is an open end fund of funds that offers five plans with different equity and fixed income allocations. This gives investors the flexibility to choose a plan suitable for them, in line with their risk profile, investment horizon and returns expectations. The scheme invests in a combination of Franklin Templeton India s equity and fixed income schemes, with a pre-determined steady state allocation and has an inbuilt rebalancing feature that makes each plan revert back to the above steady state asset allocation once every six months. Also, based on market conditions, the fund manager has the flexibility to make a tactical allocation of 10% on either side of the steady state asset allocation. 10

11 The performance of the Growth Option in each of the scheme s Plans is captured below: The 20s Plan - Growth 36.20% 17.50% Benchmark** 24.42% 14.57% The 30s Plan - Growth 28.41% 14.13% Benchmark** 21.38% 12.35% The 40s Plan - Growth 23.61% 11.93% Benchmark** 19.26% 10.32% The 50s Plus Plan - Growth 17.11% 9.07% Benchmark** 16.83% 8.64% The 50s Plus Floating Rate Plan - Growth 14.53% 10.15% Benchmark** 12.26% 9.56% The 20s Plan - Direct - Growth 36.72% 19.75% Benchmark** 24.42% 15.85% The 30s Plan - Direct - Growth 28.95% 16.24% Benchmark** 21.38% 13.83% The 40s Plan - Direct - Growth 24.06% 14.15% Benchmark** 19.26% 12.21% The 50s Plus Plan - Direct - Growth 17.61% 10.81% Benchmark** 16.83% 10.86% The 50s Plus Floating Rate Plan - Direct - Growth 14.91% 11.50% Benchmark** 12.26% 10.83% Additional Benchmark Not Applicable Not Applicable *Compounded annualized returns. Inception Date: FILSF 20s Plan - Growth/30s Plan - Growth/40s Plan - Growth/50s Plus Plan - Growth: December 1, 2003, FILSF 50s Plus Floating Rate Plan - Growth: July 9, FILSF 20s Plan - Direct Growth/30s Plan - Direct Growth/40s Plan - Direct Growth/50s Plus Plan - Direct Growth/50s Plus Floating Rate Plan - Direct Growth: January 1, **Benchmark: The 20s Plan - 65% S&P BSE Sensex + 15% CNX % Crisil Composite Bond Fund Index; The 30s Plan - 45% S&P BSE Sensex + 10% CNX % Crisil Composite Bond Fund Index; The 40s Plan - 25% S&P BSE Sensex + 10% CNX % Crisil Composite Bond Fund Index; The 50s Plus Plan - 20% S&P BSE Sensex + 80% Crisil Composite Bond Fund Index; The 50s Plus Floating Rate Plan - 20% S&P BSE Sensex + 80% Crisil Liquid Fund Index. Franklin Infotech Fund Launched in August 1998, Franklin Infotech Fund (FIF) is an open-end equity fund focused on companies operating in the information technology (IT) space. In the first two quarters for the last fiscal, better than expected earnings reported by some key players augured well for the sector. However, the anticipation of subdued quarterly earnings for the last quarter and lack of any decisive guidance from certain key players limited the performance of the sector, towards the end of the fiscal. The fund s performance since inception and for the last year is captured below - FIF - Growth 28.97% 20.84% B: S&P BSE IT 29.75% N.A. AB: CNX Nifty 26.65% 14.81% FIF - Direct - Growth 29.54% 33.64% B: S&P BSE IT 29.75% 36.37% AB: CNX Nifty 26.65% 17.17% *compounded annualized returns. Inception Date: FIF - Growth: August 22, 1998, FIF- Direct - Growth: January 1, B: Benchmark, AB: Additional Benchmark 11

12 The fund continued to hold bias towards large, well-managed IT companies, and accordingly the fund s top allocations as of March 2015 were to - Infosys Technologies (32.91%), Tata Consultancy Services (27.69%) and Wipro (9.69%). The above allocation reflects our views that with limited opportunities to further increase market share in the global arena, larger players in the Indian IT services space could see relatively higher growth. We have therefore been selective in our approach and invested in what we believe are high-quality, well-managed companies. We believe companies that can stay competitive in the current environment, for example, by moving up the value chain and offering a better value proposition to their clients, are likely to have an edge over their rivals. Looking ahead, we believe that Europe may continue to be one of the key drivers for IT industry, given the low penetration levels. Further, any recovery in global economy especially in the US and UK could augur well for discretionary IT spending. Templeton India Children Asset Plan Launched in June 1998, Templeton India Children Asset Plan (TICAP) is designed to provide financial solutions for children s future by investing in a prudent mix of debt and equity, based on the choice of plan. All subscriptions in the fund were locked-in till the beneficiary child attains 18 years of age. As a part of the product rationalisation process, Templeton India Children s Asset Plan - Gift Plan (TICAP-GP) was merged into Franklin India Balanced Fund (FIBF) and Templeton India Children s Asset Plan - Education Plan (TICAP-EP) was merged into Franklin India Monthly Income Plan (FIMIP). The effective date of the mergers was as on August 8, The fund s performance since inception and for the last year till the merger date is summarized below: From Mar 31, 2014 to merger date) Since inception* (upto the merger date) TICAP - EP - Growth 6.38% 8.99% B: Crisil MIP Blended Index # 5.49% N.A. AB: Crisil 10 Year Gilt Index 2.76% N.A. TICAP - EP - Direct - Growth 6.47% 7.19% B: Crisil MIP Blended Index # 5.49% 8.13% AB: Crisil 10 Year Gilt Index 2.76% 2.48% TICAP - GP - Growth 13.43% 12.03% B: Crisil Balanced Fund Index # 9.85% N.A. AB: CNX Nifty 12.89% 13.37% TICAP - GP - Direct - Growth 13.57% 16.09% B: Crisil Balanced Fund Index # 9.85% 13.05% AB: CNX Nifty 12.89% 16.22% # Benchmark Index has been adjusted for the 10% CNX Nifty + 90% Crisil Composite Bond Fund Index for the period March 28, 2002 to September 9, 2005.*compounded & annualized returns. Inception Date: for Education and Gift Plans - Growth: June 5, 1998, for Education and Gift Plans - Direct Growth: January 1, B: Benchmark, AB: Additional Benchmark Franklin India Multi-Asset Solution Fund Franklin India Multi-Asset Solution Fund (FIMAS) is an open end fund of funds which seeks to achieve capital appreciation and diversification through a mix of strategic and tactical allocation to various asset classes such as equity, debt, gold and cash by investing in funds investing in these asset classes. The asset allocation is dynamically managed across each of the asset classes based on proprietary model. The fund proposes to primarily invest in Franklin Templeton's existing local equity, fixed income, liquid products and in domestic Gold ETFs. The proprietary model uses a mix of 12

13 strategic and tactical allocation. The strategic allocation stems from a combination of quantitative and qualitative analysis and it determines long term allocation to different asset classes. In order to determine the tactical allocation, the model uses a combination of economic, valuation and momentum / sentiment indicators to determine the allocation towards a particular asset class/security. The fund dynamically changes its allocation to different asset classes on monthly basis. At the end of March 2015, fund s asset allocation was: Asset Instrument Total Portfolio Allocation Equity Franklin India Bluechip Fund 40.30% Fixed Income Franklin India Short Term Income Plan 38.50% Gold Goldman Sachs Gold ETF 21.30% Cash Franklin India Treasury Management Account 0.00% The fund s performance since inception is summarized below: Last 1 Year Since Inception# FIMAS - Growth N.A 1.92% B: Crisil Balanced Fund Index N.A 0.73% FIMAS - Direct -Growth N.A 2.48% B: Crisil Balanced Fund Index N.A 0.73% AB: Not Applicable Not Applicable #Absolute returns. Inception Date: November 28, B: Benchmark, AB: Additional Benchmark Franklin India Smaller Companies Fund Franklin India Smaller Companies Fund (FISCF) is a fund focused on investment opportunities in the mid and small cap segment. The fund was launched as a 5-year closed-end equity product in January 2006 and was converted into an open-end fund with effect from January 14, The fund s performance since inception and for the last year is captured below: FISCF - Growth 77.23% 15.74% B: CNX Midcap 50.96% 13.01% AB: CNX Nifty 26.65% 12.57% FISCF - Direct - Growth 79.43% 44.31% B: CNX Midcap 50.96% 20.21% AB: CNX Nifty 26.65% 17.17% *compounded and annualized returns. Inception Date: FISCF -- Growth: January 13, 2006, FISCF- Direct- Growth: January 1, B: Benchmark, AB: Additional Benchmark Mid and small cap stocks outperformed the broad markets last year, on account of positive sentiment for equities. The fund also outperformed its benchmarks by a significant margin. On an absolute basis, industrials and materials sector were the top contributors. Expectations of revival of investment cycle augured well for companies in these sectors. As all the sectors closed the year in green, there were no detractors on an absolute basis. In terms of economic/market outlook for the year ahead, the equity markets had probably overestimated the pace of economic recovery, which is now getting normalized. There have been significant corporate earnings downgrades in the last few months which have led to revision in the earnings growth for FY16 and FY17 as well. Pick up government spending, which could probably be from 2nd half of FY16, may bode well for improvement in earnings growth. We believe that valuations have run ahead of fundamentals with respect to certain sector/stocks, leading to pockets of overvaluation. Hence, it is important to focus on companies with good fundamentals, strong cash flows with reasonable visibility of earnings. Irrespective of near-term 13

14 caution, we believe that structural story may continue to play as the long term drivers remain intact. The fund managers will stick to the fundamental research oriented approach to identifying opportunities in the mid/small capitalization space. Franklin India Prima Fund Launched in December 1993, Franklin India Prima Fund (FIPF) is an open-end equity fund focused on mid and small-capitalization stocks. The fund follows a blend of value and growth style with a bottom-up approach to stock selection across sectors. Stocks are selected based on fundamental research with a medium to long term perspective. As a strategy, the fund predominantly invests in mid-cap stocks with a smaller exposure to small-cap stocks. The fund s performance since inception and for the last year is captured below: FIPF - Growth 68.51% 21.71% B: CNX % 10.40% B: CNX Midcap 50.96% N.A. AB: CNX Nifty 26.65% 10.50% FIPF - Direct - Growth 70.64% 37.18% B: CNX % 18.30% B: CNX Midcap# 50.96% 20.21% AB: CNX Nifty 26.65% 17.17% #CNX Midcap index has been included as additional benchmark for FIPF effective May 20, *compounded and annualized returns. Inception Date: FIPF - Growth: December 1, 1993, FIPF- Direct- Growth: January 1, B: Benchmark, AB: Additional Benchmark Indian equity markets had a landmark year and ended FY15 with highest gains over last five years. The rally which began on the anticipation of a stable government was boosted by a decisive victory in central elections, resulting in a stable government with focus on economic growth and development. Additionally, favorable developments on the macroeconomic front such as substantial fall in both CPI and WPI inflation levels and significant fall in current account deficit, coupled with a steep fall in global crude oil prices and large foreign inflows supported the overall market momentum. Given the positive sentiment for equities, mid and small cap indices outperformed their large cap peers. The fund also outperformed its benchmark by a healthy margin. Industrials and financials holdings were the top contributors to the fund s performance. While expectations of revival of investment cycle augured well for companies in the industrials sector, financial sector benefited from sustained drop in inflation and anticipation of softer interest rates regime on the back of two surprise rate cuts by RBI in the last quarter of FY15. As all the sectors closed the year in green, there were no detractors on an absolute basis. In terms of economic/market outlook for the year ahead, the equity markets had probably overestimated the pace of economic recovery, which is now getting normalized. There have been significant corporate earnings downgrades in the last few months which have led to revision in the earnings growth for FY16 and FY17 as well. Pick up government spending, which could probably be from 2nd half of FY16, may bode well for improvement in earnings growth. We believe that valuations have run ahead of fundamentals with respect to certain sector/stocks, leading to pockets of overvaluation. Hence, it is important to focus on companies with good fundamentals, strong cash flows with reasonable visibility of earnings. Irrespective of near-term caution, we believe that structural story may continue to play as the long term drivers remain intact. 14

15 Franklin India Opportunities Fund Launched in February 2000, Franklin India Opportunities Fund (FIOF) is an open-end equity fund that adopts a bottom-up approach to stock-picking and focuses on four themes - (a) Companies that operate in the space where India has a strong advantage (b) Globally competitive Indian companies that have the potential to participate in global opportunities as well (c) Companies that are undervalued (d) Companies that are best positioned to take advantage of the opportunities thrown up by the growing economy. As per our bottom-up and fundamental analysis, well-managed companies in financial services (banks, diversified financials), industrials (electrical equipment and construction and engineering) and information technology are likely to do well in the future. Accordingly a significant portion of our current portfolio is allocated in these segments. The fund s performance since inception and in the last one year ended March 2015 is summarized below: FIOF - Growth 57.59% 12.32% B: S&P BSE 200 # 31.93% 0.30% AB: CNX Nifty 26.65% 11.00% FIOF - Direct - Growth 58.17% 28.14% B: S&P BSE % 17.87% AB: CNX Nifty 26.65% 17.17% *Compounded annualized returns. # Index adjusted for the period February 21, 2000 to March 10, 2004 with the performance of ET Mindex. Inception Date: FIOF- Growth: February 21, 2000, FIOF - Direct - Growth: January 1, B: Benchmark, AB: Additional Benchmark During the year, the fund outperformed its benchmark by a significant margin. Financials and Industrials were the top contributors. Financial sector benefited from sustained drop in inflation and anticipation of softer interest rates regime on the back of two surprise rate cuts by RBI in the last quarter of FY15. Meanwhile, expectations of revival of investment cycle augured well for companies in the industrials sector. As all the sectors closed the year in green, there were no detractors on an absolute basis. A divergence in consumption pattern can be seen in rural and urban areas. Moreover, rural wage inflation has come down which is likely to impact inflation and rural demand significantly. Given the slowdown in rural demand, we believe that the recovery is likely to be led by urban consumer demand and investments in infrastructure sector like roads and railways. In terms of portfolio strategy, we will continue to stick to fundamental research-driven approach to identify companies across sectors that are likely to benefit from the structural changes in India s economy over the medium to long term. This, in our view, should help us navigate through this phase well. Franklin India High Growth Companies Fund Launched in June 2007, Franklin India High Growth Companies Fund (FIHGCF) is an open-end equity fund investing in companies that appear well-placed to deliver high growth rates by capturing the growth potential across various macro themes over the medium to long-term. The fund adopts a growth style of investing and combines bottom-up stock selection with top-down industry themes to identify such companies. As high growth rates are often characteristic of emerging companies/ sectors - mid to small cap market capitalization - the portfolio tends to have a bias towards lower capitalization. The fund s performance since inception and in the last one year ended March 2015 is summarized below: FIHGCF - Growth 73.45% 15.27% 15

16 B: CNX % 8.05% AB: CNX Nifty 26.65% 8.24% FIHGCF - Direct - Growth 75.41% 38.49% B: CNX % 18.30% AB: CNX Nifty 26.65% 17.17% *compounded and annualized returns. Inception Date: FIHGCF - growth: July 26, 2007, FIHGCF- Direct- Growth: January 1, B: Benchmark, AB: Additional Benchmark Indian equity markets had a landmark year and ended FY15 with highest gains over last five years. The rally which began on the anticipation of a stable government was boosted by a decisive victory in central elections, resulting in a stable government with focus on economic growth and development. Additionally, favorable developments on the macroeconomic front such as substantial fall in both CPI and WPI inflation levels and significant fall in current account deficit, coupled with a steep fall in global crude oil prices and large foreign inflows supported the overall market momentum. FIHGCF managed to outperform the benchmark indices during this period by a significant margin. On an absolute basis, portfolio performance was helped by strong gains in materials and financials. While expectations of revival of investment cycle augured well for companies in the materials sector, financial sector benefited from sustained drop in inflation and anticipation of softer interest rates regime on the back of two surprise rate cuts by RBI in the last quarter of FY15. As all the sectors closed the year in green, there were no detractors on an absolute basis. In terms of economic/market outlook for the year ahead, the equity markets had probably overestimated the pace of economic recovery, which is now getting normalized. There have been significant corporate earnings downgrades in the last few months which have led to revision in the earnings growth for FY16 and FY17 as well. Pick up government spending, which could probably be from 2nd half of FY16, may bode well for improvement in earnings growth. We believe that valuations have run ahead of fundamentals with respect to certain sector/stocks, leading to pockets of overvaluation. Hence, it is important to focus on companies with good fundamentals, strong cash flows with reasonable visibility of earnings. Irrespective of near-term caution, we believe that structural story may continue to play as the long term drivers remain intact. Franklin Asian Equity Fund Launched in January 2008, Franklin Asian Equity Fund (FAEF) focuses on investing in companies domiciled in the Asia ex Japan region. The fund seeks to provide investors exposure to companies that are benefitting and/or expected to benefit from rapid growth in the Asia ex Japan region. Last year, Asia ex-japan markets recorded strong gains amidst hopes of growth recovery and increased global risk appetite. The fund s performance since inception and in the last one year ended March 2015 is summarized below: FAEF - Growth 14.97% 7.07% B: MSCI Asia (ex Japan) Standard Index 12.83% 7.20% AB: CNX Nifty 26.65% 5.09% FAEF - Direct - Growth 15.53% 10.79% B: MSCI Asia (ex Japan) Standard Index 12.83% 9.67% AB: CNX Nifty 26.65% 17.17% *compounded and annualized returns. Inception Date: FAEF - Growth: January 16, 2008, FAEF - Direct - Growth: January 1, B: Benchmark, AB: Additional Benchmark 16

17 In our view, the major attraction for investors in emerging Asia is the region s strong and persistent economic growth, driven by generally favorable demographic influences, ongoing urbanization and the rapid adoption of new technology such as smartphones and the internet. Lower oil prices represent a further positive factor for the region, which is a net oil and gas importer. Gross domestic product growth in Asia, although a little slower than in the recent past (partly due to a high base effect), is expected to be stronger in 2015 and beyond than that from either developed markets or global emerging markets. Franklin India Feeder - Franklin US Opportunities Fund Franklin India Feeder - Franklin US Opportunities Fund (FIF-FUSOF) is an open end fund of fund scheme that seeks to provide capital appreciation by investing predominantly in units of Luxembourg domiciled Franklin US Opportunities Fund (FUSOF). FUSOF was launched in 2000 and has assets of about $4.7 bln at end of March 31, FUSOF s investment philosophy is to identify and invest in US based high-quality growth companies with sustainable long-term growth prospects, superior profitability and meaningful competitive advantages. The aim of FIF- FUSOF is to leverage on the firm s global expertise and provide investors with an opportunity to diversify portfolios and gain exposure to US stock markets. The fund s performance since inception and in the last one year ended March 2015 is summarized below: FIF-FUSOF - Growth 20.53% 24.73% B: Russell 3000 Growth 21.96% 26.88% FIF-FUSOF - Direct - Growth 21.71% 29.47% B: Russell 3000 Growth 21.96% 28.67% Additional Benchmark Not Applicable Not Applicable *compounded and annualized returns. Inception Date: FIF-FUSOF-Growth: February 6, 2012, FIF-FUSOF - Direct - Growth: January 2, B: Benchmark, AB: Additional Benchmark The underlying fund continues to focus on investing in companies with strong competitive advantages, which are poised to benefit from long-term growth trends. We believe that strength in both consumer and corporate America will likely support continued economic growth in the United States. We think the prevailing environment of low inflation, US-dollar strength and a slowly improving labor market could allow for a long runway before significant interest-rate increases are required. These factors may continue to contribute to an economic backdrop that is supportive of the recovering domestic economy and many of the secular growth themes our team has identified, in particular US consumer strength, technological innovation and evolving health care discoveries. Our outlook for US equity markets remains positive; however, we would not be surprised to see periods of market volatility as the Fed prepares to raise interest rates and geopolitical risks remain unresolved. In our view, periods of market volatility brought on by these risks often present great buying opportunities for long-term investors. Franklin India Feeder - Franklin European Growth Fund Franklin India Feeder - Franklin European Growth Fund (FIF-FEGF) is an open ended fund of funds scheme investing overseas that seeks to provide capital appreciation by investing predominantly in units of Franklin European Growth Fund (FEGF), an overseas equity fund which primarily invests in securities of issuers incorporated or having their principal business in European countries. FEGF was launched in 2000, and has Euro 1.27 bln assets as on March 31,

18 The fund utilizes a bottom-up, long-term strategy and endeavors to take advantage of market volatility to gain exposure to companies that exhibit may have strong and sustainable competitive advantages, solid balance sheets and substantial cash generation. With a contrarian style, the fund s philosophy and process often lead to segments of the market that are out of favor with other investors. The fund s performance since inception is summarized below: Last 1 Year Since Inception# FIF-FEGF - Growth N.A % B: MSCI Europe N.A -2.88% FIF-FEGF - Direct - Growth N.A % B: MSCI Europe N.A -2.88% Additional Benchmark Not Applicable Not Applicable #absolute returns. Inception Date: May 19, 2014 for both Growth and Direct-Growth plans. B: Benchmark, AB: Additional Benchmark The markets rose sharply in first quarter of 2015 on account of a pick-up in gross domestic product growth supported by a very expansionary central bank policy, a weaker euro and cheaper oil. However, we see some potential challenges ahead. Geopolitics mainly Ukraine and ongoing tensions with Russia and turmoil in the Middle East for could likely weigh on sentiment and economic growth. All in all, we believe the risks and opportunities for oil prices which have the most direct impact on Europe to be balanced. For equity markets, performance will continue to vary significantly for individual sectors and countries as lower oil prices and a weaker euro will impact various areas of the equity markets differently. We continue to believe that stockpicking, and not focusing on a single macroeconomic theme, will remain crucial for performance in Franklin India Flexi Cap Fund Franklin India Flexi Cap Fund (FIFCF) is an open-end equity fund that invests in stocks across the market capitalization range. The fund follows a bottom-up, fundamental driven approach to investing. Stock selection process focuses on companies with identifiable drivers of growth, strong management capabilities, healthy balance sheet and attractive valuations. The fund s performance since inception and in the last one year ended March 2015 is summarized below: FIFCF - Growth 52.00% 19.91% B: CNX % 14.22% AB: CNX Nifty 26.65% 14.90% FIFCF - Direct - Growth 53.05% 29.09% B: CNX % 18.30% AB: CNX Nifty 26.65% 17.17% *compounded and annualized returns. Inception Date: FIFCF - Growth: March 2, 2005, FIFCF - Direct - Growth: January 1, B: Benchmark, AB: Additional Benchmark Indian equity markets had a landmark year and ended FY15 with highest gains over last five years. The rally which began on the anticipation of a stable government was boosted by a decisive victory in central elections, resulting in a stable government with focus on economic growth and development. Additionally, favorable developments on the macroeconomic front such as substantial fall in both CPI and WPI inflation levels and significant fall in current account deficit, coupled with a steep fall in global crude oil prices and large foreign inflows supported the overall market momentum. FIFCF managed to outperform the benchmark indices during this period by a significant margin. On an absolute basis, portfolio performance was helped by strong gains in financials and industrials. While financial sector benefited from sustained drop in inflation and 18