AUDITORS REPORT. To the Board of Directors of Trustees of FRANKLIN TEMPLETON MUTUAL FUND FRANKLIN TEMPLETON FIXED TENURE FUND SERIES X - PLAN B

Transcription

1 AUDITORS REPORT To the Board of s of Trustees of FRANKLIN TEMPLETON MUTUAL FUND SERIES X PLAN B 1. We have audited the attached balance sheet of FRANKLIN TEMPLETON MUTUAL FUND SERIES X PLAN B (the Scheme as at September 28, 2011 (the 'Maturity Date') and the revenue account for the period from April 1, 2011 to September 28, 2011 ('the Period'), together with the notes thereon, annexed thereto. These financial statements are the responsibility of the management of Franklin Templeton Asset Management (India) Private Limited, the Scheme s asset managers. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We report that: i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; ii. The balance sheet and revenue account dealt with by this report are in agreement with the books of account; iii. In our opinion, the balance sheet and revenue account dealt with by this report have been prepared in conformity with the accounting policies and standards specified in the Ninth Schedule to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 (the SEBI Regulations );

2 iv. In our opinion, and to the best of our information and according to the explanations given to us, the said financial statements give the information required by the SEBI Regulations as applicable and give a true and fair view in conformity with the accounting principles generally accepted in India: a) in the case of the balance sheet, of the state of affairs of the Scheme as at September 28, 2011; and b) in the case of the revenue account, of the surplus for the Period ended on that date. For S.R. Batliboi & Co. Firm Registration Number E Chartered Accountants Sd/ per Shrawan Jalan Partner Membership No.: Mumbai, July 13, 2012

3 BALANCE SHEET AS AT SEPTEMBER 28, 2011 (the 'Maturity Date') (All amounts in thousands of Rupees) SOURCES OF FUNDS Schedules SERIES X PLAN B As at As at September 28, 2011 March 31, Unit Capital 2(b) & 3 147, ,136 2 Reserves and Surplus Unrealised Appreciation Reserve 73 6, Retained Surplus 29,975 27,485 3 Current Liabilities and Provisions Current Liabilities 7,114 3,084 TOTAL 184, ,008 APPLICATION OF FUNDS 1 Investments 2(c) & Listed Securities Equity Shares , Other Debentures and Bonds 59, Unlisted Securities Securitised Debt Securities 9, Commercial Papers 48,480 2 Other Current Assets Cash and Bank Balances CBLO/ Reverse Repo Lending 180,818 32, Others 61 4,239 3 Accumulated Unit Discount, Net 8 3,826 3,032 TOTAL 184, ,008 Notes to Accounts 1 to 15 The accompanying schedules are an integral part of this Balance Sheet. As per our attached report of even date For Franklin Templeton Asset Management (India) Private Limited Sd/ Deepak Satwalekar Sd/ Harshendu Bindal President Sd/ Sd/ For S.R. Batliboi & Co. For Franklin Templeton Trustee Vivek Kudva Vivek Pai Firm Registration No.: E Services Private Limited Vice President Chartered Accountants Sd/ Sd/ Sd/ Anand J. Vashi Anand Radhakrishnan Umesh Sharma Senior Vice President and Vice President and July 13, 2012 Mumbai Sd/ Murali Krishna Yerram Vice President and Portfolio Manager Sd/ Sd/ Sd/ Sd/ per Shrawan Jalan Indu Shahani Anil Prabhudas Pallab Roy Partner Membership No Asst. Vice President and Senior Manager and Portfolio Manager Sd/ Rajat Malhotra Asst. Vice President and Portfilio Manager

4 REVENUE ACCOUNT FOR THE PERIOD FROM APRIL 1, 2011 TO SEPTEMBER 28, 2011 (the 'Maturity Date') (' The Period') (All amounts in thousands of Rupees) Schedules SERIES X PLAN B From April 1, 2011 to Year ended September 28, 2011 March 31, INCOME 1.1 Dividend 2(d) Interest 2(d) & 9 6,071 11, Realised Gain on External Sale / Redemption of Investments, net 2(d) 4,094 5, Other Income ,571 16,784 2 EXPENSES 2.1 Management Fees 10 1,528 3, Service Tax on Management Fees Transfer Agents Fees and Expenses Custodian Fees Trusteeship Fees Commission to Agents Marketing and Distribution Expenses Audit Fees Other Operating Expenses ,997 4, Expenses Written Back pertaining to previous year (58) (4) 1,939 4,196 3 NET REALISED GAINS / (LOSSES) FOR THE YEAR / PERIOD 8,632 12,588 4 Change in Unrealised Depreciation in value of Investments 2(c) & 6(ii) (615) NET GAINS / (LOSSES) FOR THE YEAR / PERIOD (34) 9,247 12,155 6 Change in Unrealised Appreciation in the value of Investments (6,230) (3,709) 7 NET GAINS / (LOSSES) FOR THE YEAR / PERIOD AFTER CHANGE IN UNREALISED APPRECIATION (5+6) 3,017 8, Add: Balance Transfer from Unrealised Appreciation Reserve 4 6,303 10, Less: Balance Transfer to Unrealised Appreciation Reserve ,303 8 Total 9,247 12,155 9 Dividend Appropriation 9.1 Income Distributed during the year / period 13 (5,952) (3,003) 9.2 Tax on Income Distributed during the year / period 13 (805) (416) 10 NET SURPLUS/(DEFICIT) FOR THE YEAR TRANSFERRED TO 4 2,490 8,736 (8+9) BALANCE SHEET Notes to Accounts 1 to 15 The accompanying schedules are an integral part of this Revenue Account. As per our attached report of even date For Franklin Templeton Asset Management (India) Private Limited Sd/ Deepak Satwalekar Sd/ Harshendu Bindal President Sd/ Sd/ For S.R. Batliboi & Co. For Franklin Templeton Trustee Vivek Kudva Vivek Pai Firm Registration No.: E Services Private Limited Vice President Chartered Accountants Sd/ Sd/ Sd/ Anand J. Vashi Anand Radhakrishnan Umesh Sharma Senior Vice President and Vice President and July 13, 2012 Mumbai Sd/ Murali Krishna Yerram Vice President and Portfolio Manager Sd/ Sd/ Sd/ Sd/ per Shrawan Jalan Indu Shahani Anil Prabhudas Pallab Roy Partner Membership No Asst. Vice President and Senior Manager and Portfolio Manager Sd/ Rajat Malhotra Asst. Vice President and Portfilio Manager

5 SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE PERIOD FROM APRIL 1, 2011 TO SEPTEMBER 28, 2011 (the 'Maturity Date') ('The Period') (All amounts in thousands of Rupees unless specified otherwise) 1. BACKGROUND Franklin Templeton Mutual Fund ( the Fund ) was established as a trust under the Indian Trusts Act, 1882, by way of a trust deed dated January 4, 1996, a supplementary trust deed dated March 30, 1996 and August 26, 2005 executed by Templeton International Inc. USA, the sponsor of the Fund. Templeton International Inc. is a part of the Franklin Templeton Investments group. In accordance with the Securities and Exchange Board of India ( SEBI ) (Mutual Funds) Regulations, 1996 ( the SEBI Regulations ), the Board of s of Franklin Templeton Trustee Services Private Limited ( the Trustee ) has appointed Franklin Templeton Asset Management (India) Private Limited ('the AMC') to manage the Fund s affairs and operate its Schemes. The objective and other feature of the schemes covered in the financial statement are as under: Scheme Name Nature of the Scheme Date of Allotment Scheme Objective Plans Offered Franklin Templeton Fixed Tenure Fund Series X Plan B Close ended mutual fund scheme September 29, 2008 The Scheme seeks to generate returns and reduce The Scheme offers its investors two options: the Dividend (Payout) interest rate volatility, through a portfolio of fixed Option and the Growth Option ('the Options'). income securities with a maturity profile generally in line with the fund's duration along with capital appreciation through equity exposure. The financial statements have been prepared as at the Scheme's maturity date and not prepared on going concern basis. The assets are stated at their expected realizable values and liabilities at their expected settlement values as determined by the Schemes' management in accordance with the SEBI Regulations. However, as at the financial statement date, this does not have any impact on the Schemes' net assets. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared on the accrual basis of accounting, under the historical cost convention, as modified for investments, which are markedtomarket. The significant accounting policies, which are in accordance with the SEBI Regulatio (a) (b) Determination of net asset value The net asset value of the units of the Scheme is determined separately for units issued under the Plans after including the respective unit capital and reserves and surplus, and reducing net deficit and accumulated discount, if any. For reporting the net asset values, the daily income earned, including realised profit or loss and unrealised gain or loss in the value of investments, and expenses incurred by the Scheme, are allocated to the Plans in proportion to their respective daily Unit capital Unit capital represents the net outstanding units at the balance sheet date, thereby reflecting all transactions relating to the year ended on that date. Upon issue and redemption of units, the net premium or discount to the face value of units is adjusted against the unit premium reserve of the Scheme, after an appropriate portion of the issue proceeds and redemption payouts is credited or debited respectively to the equalisation account, a mandatory requirement for open ended mutual fund Schemes. Prior to March 15, 2010, the Unit Premium Reserve was available for dividend distribution except to the extent it is represented by unrealised net appreciation in value of investments. (c) Investments Accounting for investment transactions Right entitlements are recognised as investments on the exrights date. Bonus entitlements are recognised as investments on the exbonus date. Other Corporate Action entitlements are recognised on the ex date. Valuation of investments Investments in Equity shares under Qualified Institutional Placement (QIP) are valued at cost or market value, whichever is lower, till the date of listing of the security. Thinly Traded, Nontraded and unlisted Equity are valued "in good faith" as determined, in accordance with the SEBI Regulations. Purchase and sale of investments are recorded on the date of the transaction, at cost and sale price respectively, after considering brokerage, commission, securities transaction tax and fees payable or receivable, if any. The front end fee receivable, if any, is reduced from the cost of investment. Traded Equity and Equity related Securities are valued at the last quoted closing price on the Bombay Stock Exchange (BSE). If a security is not traded on BSE, it will be valued at the last quoted closing price on National Stock Exchange of India Limited (NSE) or any other stock exchange (in that order). If a security is not traded on any stock exchange on a particular valuation day, the last quoted closing price on BSE or NSE or other recognised stock exchange (in that order) on the earliest previous day would be used, provided such day is not more than thirty days prior to the valuation day. Investments in Central Government securities are valued based on the average of the prices provided by the CRISIL and ICRA on the valuation date with effect from September 1, 2010, as suggested by the Association of Mutual Funds in India ('the AMFI') against the earlier practice of valuing it based on the prices provided by the CRISIL. Effective from July 1, 2010, all Debt Securities (other than Government Securities, Treasury Bills and Money Market Instruments), including floating rate securities, with residual maturity of up to 91 days on the date of valuation, which are traded on the valuation date, are valued at the weighted average price at which they are traded on the particular valuation day. as against the earlier practice of valuing Debt Securities (other than Government Securities), which are traded on the valuation date, in a market lot of Rs. 5 Crores or more, at the closing market price as on the date of valuation. Effective from July 1, 2010, all Debt Securities(other than Government Securities, Treasury Bills and Money Market Instruments), including floating rate securities, with residual maturity of up to 91 days on the date of valuation, which are not traded on a particular valuation day, are valued on yield based amortisation basis, as against the earlier practice of valuing nontraded / thinly traded / unlisted debt securities of up to 182 days to maturity at yield based amortisation basis. Floating rate securities with floor and caps on coupon rate and residual maturity of up to 91 days on the date of valuation, are valued on amortization basis taking the coupon rate as floor. Effective from July 1, 2010, all debt securities (other than Government Securities, Treasury Bills and Money Market Instruments), including floating rate securities, with residual maturity of over 91 days on the date of valuation, are valued at weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day they are valued at benchmark yield/ matrix of spread over risk free benchmark yield obtained from CRISIL and ICRA (agency(ies) entrusted for the said purpose by AMFI) as against the earlier practice of valuing Nontraded / thinly traded / unlisted debt securities over 182 days to maturity on the date of valuation, using average of benchmark yields/matrix of spreads over risk free benchmark yield obtained from the CRISIL and ICRA, provided not traded on the valuation day. The securities with call option are valued at the lower of the value as obtained by valuing the security to final maturity and valuing the security to call option. In case there are multiple call options, the lowest value obtained by valuing to the various call dates and valuing to the maturity date is taken as the value of the instrument. The securities with put option are valued at the higher of the value as obtained by valuing the security to final maturity and valuing the security to put option. In case there are multiple put options, the highest value obtained by valuing to the various put dates and valuing to the maturity date is taken as the value of the instruments. Effective from July 1, 2010, money market instruments with residual maturity of over 91 days on the date of valuation, are valued at weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day they are valued at benchmark yield/ matrix of spread over risk free benchmark yield obtained from CRISIL and ICRA as against the earlier practice of valuing such securities at yield based amortisation basis. Effective from July 1, 2010, money market instruments with residual maturity of up to 91 days on the date of valuation, shall be valued at the weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day, such securities are valued on a yield based amortization basis. Effective from August 13, 2010, Treasury Bills with residual maturity over 91 days on the date of valuation, are valued based on the average of the prices provided by the CRISIL and ICRA as against earlier practice of valuing Treasury Bills at the yield based amortisation basis.

6 Effective from August 13, 2010, Treasury Bills with residual maturity of up to 91 days on the date of valuation, are valued at the yield based amortisation basis. All other investments are stated at their fair value as determined in good faith by the AMC in accordance with the SEBI Regulations and reviewed by the Trustee. The net unrealised gain or loss in the value of investments is determined separately for each category of investments. The change in the net unrealised loss, if any, between two balance sheet dates is recognised in the revenue account and the change in net unrealised gain, if any, is adjusted in an unrealised appreciation reserve. The loss on investments sold/transferred during the year is charged to the revenue account. (d) Revenue recognition Dividend income is recognised on the exdividend date. Interest on fixed income securities is recognised as income on an accrual basis. Profit or loss on sale of investments is determined on the basis of the weighted average cost method. The discount or premium, if any, to the redemption value of debt securities is amortised and recognised as interest income or expense, as the case may be, over the period to redemption. (e) Load Charges All load, including Contingent and Deferred Sales Charges, charged at the time of purchase and sale of units, is being utilised towards meeting distribution and marketing expenses. The utilization from the balances as at July 31, 2009 is restricted to a maximum of one third of the load balances as at that date. Exit load up to 1% charged at the time of sale of units, is credited to the load account and is being utilised towards meeting distribution and marketing expenses. Exit load charged in excess of 1% is credited to the Scheme immediately as Other Income. Unutilised amount of load is carried forward to subsequent period. If the amount is considered in excess by the AMC / Trustees, then such excess amount is credited to the respective Schemes as Other Income. (THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)

7 SCHEDULE TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE PERIOD ENDED SEPTEMBER 28, 2012 (the 'Maturity Date') ('The Period') SERIES X PLAN B Quantity Quantity Amount Amount Schedules September 28, 2011 March 31, 2011 September 28, 2011 March 31, UNIT CAPITAL Units of Rs 10 each fully paid up Growth Plan Outstanding, beginning of year / period 10,129, ,802, , ,022 Redeemed during the year / period (243, ) (673, ) (2,431) (6,730) Outstanding, end of year / period 9,886, ,129, , ,292 Dividend Plan Outstanding, beginning of year / period 4,884, ,894, ,844 48,944 Redeemed during the year / period (10, ) (100) Outstanding, end of year / period 4,884, ,884, ,844 48,844 Total Outstanding, beginning of year / period 15,013, ,696, , ,966 Redeemed during the year / period (243, ) (683, ) (2,431) (6,830) Outstanding, end of year / period 14,770, ,013, , ,136

8 SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE PERIOD ENDED SEPTEMBER 28, 2012 (the 'Maturity Date') ('The Period') SERIES X PLAN B Schedules September 28, 2011 March 31, RESERVES AND SURPLUS Unrealised appreciation reserve Balance, beginning of year / period 6,303 10,012 Change in net unrealised appreciation in value of investments (6,230) (3,709) Balance, end of year / period 73 6,303 Retained surplus Balance, beginning of year / period 27,485 18,749 Net surplus / ( Deficit ) transferred from revenue account 2,490 8,736 Balance, end of year / period 29,975 27,485 Total reserves and surplus 30,048 33, CURRENT LIABILITIES AND PROVISIONS Current Liabilities Management fees Trusteeship fees * * Load pending utilisation 163 Sundry creditors for units redeemed by investors 2,349 Dividend payable 6,757 Other current liabilities ,114 3,084 * Amount is less than rupees one thousand 6. INVESTMENTS (i) (ii) The investments of the Scheme are registered in the name of the Fund for the benefit of the Scheme's unitholders. Aggregate appreciation and depreciation in the value of investments are as follows: Listed Securities / Securities Awaited Listing / Unlisted Securities / Foreign Securities: (Equity shares / Preference shares / Foreign securities) appreciation 73 6,819 depreciation 568 Listed Securities / Securities Awaited Listing: (Equity linked debentures / Other debentures and bonds / Securitised debt securities) appreciation 20 depreciation 461 Unlisted Securities (Equity linked debentures / Privately placed debentures and bonds / Securitised debt securities) appreciation depreciation 174 Money Market Instruments (Commercial papers / Certificate of deposits) appreciation 52 depreciation (iii) The aggregate value of investments purchased and sold / redeemed by the Scheme during the year/period and these amounts as a percentage of average daily net assets are as follows: Purchases amount 13, ,012 as a percentage of average daily net assets Sales amount 40,131 57,119 as a percentage of average daily net assets (iv) Amount of Debentures and bonds Listed/ Awaiting listing on Stock Exchanges not traded as on the date of financial statement. 59,729

9 SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE PERIOD ENDED SEPTEMBER 28, 2012 (the 'Maturity Date') ('The Period') SERIES X PLAN B Schedules September 28, 2011 March 31, 2011 (v) During the year, the Scheme has invested in the equity shares / debentures and bonds of certain companies, which have invested in some of the schemes of the Fund in excess of five percent of those schemes' Net Assets. The Scheme's investments in these companies (except for investments in subsidiaries of these companies) as at September 28, 2011 are provided in Annexure 1. These investments have been made on account of their value at the related prices and are in accordance with the investment objectives of the Scheme. 7. OTHER CURRENT ASSETS Cash and Bank Balance Balances with banks in current accounts CBLO/ Reverse Repo Lending Collateralised lending/reverse repo 180,818 32, ,818 32,846 Others Outstanding and accrued income 61 3,784 Contracts for sale of investments ,239 TOTAL 180,879 37, ACCUMULATED UNIT DISCOUNT, NET Balance, beginning of year/period 3,032 1,372 Net premiumon ( issue) / redemption of units 794 1,660 Balance, end of year/period 3,826 3, INTEREST On Debentures and bonds 3,337 3,800 On Collateralised lending / Reverse repo 2,734 7,614 6,071 11, INCOME AND EXPENDITURE The total income and expenditure and these amounts as a percentage of the Scheme s average daily net assets on an annualised basis are provided below: Income ( net of loss on sale of investments) amount 10,571 16,784 as a percentage of average daily net assets Expenditure amount 1,939 4,196 as a percentage of average daily net assets Management Fees (including service tax) amount 1,685 3,547 as a percentage of average daily net assets 1.90^ 1.90^ Trusteeship Fees (including service tax) amount 3 6 as a percentage of average daily net assets ^ Includes additional management fees.

10 SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE PERIOD ENDED SEPTEMBER 28, 2012 (the 'Maturity Date') ('The Period') SERIES X PLAN B Schedules September 28, 2011 March 31, (8) DISCLOSURES Commission to distributors includes payments made to the following companies as commission for procuring unit subscriptions for the Scheme. Mahindra & Mahindra Financial Services Limited * Mahindra & Mahindra Financial Services Limited (ceased to be an Associate w.e.f October 08, 2010) This represents the amount paid / payable for the year/period and does not necessarily reflect the amount charged to the Scheme's revenue account. The commission is at rates similar to those offered to other distributors by the Scheme. * Amount is less than rupees one thousand 12. NET ASSET VALUE Net asset value of each unit of Rs. 10 of the Scheme Growth Plan (Rs) Dividend Plan (Rs) The net asset value of the Scheme's unit is determined after including unit capital and any reserves and surplus, and reducing net deficit and accumulated unit discount, if any. 13. INCOME DISTRIBUTION: In case where the Surplus / (Deficit) for the period (after adjustment of income equalisation) is lower than the amount of distributed income (including tax on income distributed), the income has been distributed by the Scheme to its unitholders out of the distributable surplus available with the Scheme, which consists of the Surplus / (Deficit) for the period (after adjustment of income equalisation) and the retained earnings / accumulated reserves of earlier period(s). 14. LOAD WRITEBACK During the period, unutilised load of Rs Lacs has been writtenback and has been included in the other income. 15. PRIOR YEAR COMPARATIVES These financial statements have been prepared for the period from April 01, 2011 to September 28, 2011, whereas the previous period was from April 01, 2010 to March 31, The corresponding figures for the previous period are therefore not comparable with those for the current period. The previous period figures have been regrouped/rearranged wherever necessary.

11 SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE PEPRIOD ENDED SEPTEMBER 28, 2012 (the 'Maturity Date') ('The Period') SERIES X PLAN B September 28, 2011 March 31, 2011 Annexure 1 Asian Paints Limited 751 Bharti Airtel Limited 2,751 LIC Housing Finance Limited 14,889 Reliance Industries Limited 979 Tata Teleservices Limited 48,480 Tata Steel Limited 15,474 Wipro Limited ,911 The aggregate purchases (other than by interscheme transfer/sale and those already disclosed earlier) made by the Scheme in these companies, during a period of one year before or after the date of the companies' investment are as follows: Asian Paints Limited 741 Bharti Airtel Limited 1,423 Piramal Healthcare Limited 178 Reliance Industries Limited 2,345 Tata Steel Limited Wipro Limited 567 2,885 3,365