INDEPENDENT AUDITOR S REPORT To the Trustees of Franklin Templeton Mutual Fund Report on the Financial Statements We have audited the accompanying financial statements of Franklin India FeederFranklin India European Growth Fund ( the Scheme ) which comprise the Balance Sheet as at 31 March 2016 and also the Revenue Account for the year ended 31 March 2016 and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management of Franklin Templeton Asset Management (India) Private Limited ( the Company ), the scheme s asset manager, is responsible for the preparation of the financial statements that give a true and fair view of the financial position and financial performance of the Scheme in accordance with accounting principles generally accepted in India, including the accounting policies and standards specified in the Ninth Schedule to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto ( the SEBI Regulations ). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Scheme s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the SEBI Regulations in the manner so required 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 the 31 March 2016;and (b) in the case of the Revenue Account, of the surplus for the year ended 31 March 2016 Report on Other Legal and Regulatory Requirements As required by Regulation 55(4) and clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that: a. 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. b. The balance sheet and revenue account dealt with by this report are in agreement with the books of account. c. 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 SEBI Regulations. For S.R. BATLIBOI & CO. LLP Chartered Accountants ICAI Firm Registration Number: 301003E / E300005 Sd/ per Shrawan Jalan Partner Membership Number: 102102 Place: Mumbai Date: 30 June 2016
BALANCE SHEET AS AT MARCH 31, 2016 (All amounts in thousands of Rupees) Schedules FRANKLIN INDIA FEEDER FRANKLIN EUROPEAN GROWTH FUND As at Period ended March 31, 2016 March 31, 2015 SOURCES OF FUNDS 1 Unit Capital 2(b) & 3 435,288 553,889 2 Reserves and Surplus 4 2.1 Unit Premium Reserve 56,042 30,529 2.2 Unrealised Appreciation Reserve 42,570 2.3 Retained Surplus 27,237 3 Current Liabilities and Provisions 5 3.1 Current Liabilities 20,948 9,622 TOTAL 539,515 636,610 APPLICATION OF FUNDS 1 Investments 2(c), 6 & 14 1.1 Units of Mutual Fund 372,202 482,630 2 Other Current Assets 7 2.1 Cash and Bank Balances 371 1,013 2.2 CBLO/ Reverse Repo Lending 2,833 4,154 2.3 Others 20,117 4,821 3 Net Deficit 8 143,992 143,992 TOTAL 539,515 636,610 Notes to Accounts 1 to 14 The accompanying schedules are an integral part of this Balance Sheet. As per our attached report of even date For S.R. Batliboi & Co. LLP For Franklin Templeton Trustee For Franklin Templeton Asset Management ICAI Firm Registration No.: 301003E/E300005 Services Private Limited (India) Private Limited Chartered Accountants Sd/ Sd/ Sd/ Sd/ per Shrawan Jalan Anand J. Vashi Deepak Satwalekar S. Jayaram Partner Director Director Director Membership No. 102102 Sd/ Sd/ Sd/ Vivek Kudva Harshendu Bindal Ajay Narayan Director President Vice President Mumbai Sd/ Anand Radhakrishnan Senior Vice President & Chief Investment Officer Franklin Equity (India) Sd/ Srikesh Nair Senior Manager & Research Analyst Franklin Equity (India)
REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016 (All amounts in thousands of Rupees) Schedules FRANKLIN INDIA FEEDER FRANKLIN EUROPEAN GROWTH FUND Year ended Period ended March 31, 2016 March 31, 2015 1 INCOME 1.1 Interest 2(d) & 9 240 907 1.2 Realised Gain on Foreign Exchange Transactions, net 2(d) 5,883 1.3 Change in Unrealised Appreciation in the value of Investments (42,570) 42,570 1.4 Other Income 773 1,677 (41,557) 51,037 2 EXPENSES 2.1 Realised Loss on Foreign Exchange Transactions, net 2(d) 245 2.2 Realised Loss on External Sale / Redemption of Investments, net 2(d) 10,605 26,819 2.3 Management Fees 10 3,184 3,107 2.4 Service Tax on Management Fees 10 438 384 2.5 Transfer Agents Fees and Expenses 10 568 642 2.6 Custodian Fees 1 1 2.7 Trusteeship Fees 10 13 15 2.8 Commission to Agents 3,337 4,097 2.9 Investor Education Expense 2(g) 89 102 2.10 Marketing and Distribution Expenses 229 300 2.11 Audit Fees 9 17 2.12 Change in Unrealised Depreciation in value of Investments (foreign Currency) 2(c) & 6(ii) (74,126) 102,229 2.13 Change in Unrealised Depreciation in value of Investments 2(c) & 6(ii) 16,235 2.14 Change in unrealised (appreciation)/depreciation on translation of (89) other assets and liabilities denominated in foreign currencies 2.15 Other Operating Expenses 100 135 (39,162) 137,848 3 NET INCOME AS PER REVENUE ACCOUNT (2,395) (86,811) 4 Add: Balance Transfer from Unrealised Appreciation Reserve 4 42,570 5 Add / (Less): Equalisation Credit/(Debit) 2(e) (12,938) (14,611) 6 NET SURPLUS FOR THE YEAR TRANSFERRED TO 4 BALANCE SHEET (8+9) 27,237 (143,992) * Amount is less than rupee one thousand. Notes to Accounts 1 to 14 The accompanying schedules are an integral part of this Revenue Account. As per our attached report of even date For S.R. Batliboi & Co. LLP For Franklin Templeton Trustee For Franklin Templeton Asset Management ICAI Firm Registration No.: 301003E/E300005 Services Private Limited (India) Private Limited Chartered Accountants Sd/ Sd/ Sd/ Sd/ per Shrawan Jalan Anand J. Vashi Deepak Satwalekar S. Jayaram Partner Director Director Director Membership No. 102102 Sd/ Sd/ Sd/ Vivek Kudva Harshendu Bindal Ajay Narayan Director President Vice President Mumbai Sd/ Anand Radhakrishnan Senior Vice President & Chief Investment Officer Franklin Equity (India) Sd/ Srikesh Nair Senior Manager & Research Analyst Franklin Equity (India)
SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016 (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 Directors 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 scheme covered in the financial statement are as under: Scheme NameScheme Objective Nature of the Scheme Date of Allotment Plans Offered Franklin India Feeder Franklin European "An Openend May 19, 2014 The Fund seeks to provide capital appreciation by The Scheme offers its investors two plans: the Growth Fund fund of funds investing predominantly in units of Franklin Dividend Plan (with Reinvestment & Payout scheme investing European Growth Fund (European Fund), an Options), the Growth Plan, Direct Growth Plan, overseas" overseas Franklin Templeton mutual fund which Direct Dividend Plan (with Reinvestment & primarily invests in securities in the European Payout Options) ( the Plans ). countries. 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. These financial statements are prepared in accordance and 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 significant accounting policies, which are in accordance with the SEBI Regulations and have been approved by the Board of Directors of the AMC and the Trustee, are stated below. (a) 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 net assets as at the end of the immediately preceding day. (b) 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. (c) Investments Accounting for investment transactions Foreign currency transactions Valuation of investments 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. In terms of SEBI circular no. CIR/IMD/DF/21/2012 dated September 13, 2012, brokerage and transaction costs (including all taxes) incurred for the purpose of execution of trade in excess of 0.12% in case of cash market transaction is charged to the Total Expense Ratio of the fund. Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are reported using an exchange rate prevalent on the valuation date / date of the transaction. Exchange differences Exchange differences arising on the settlement of monetary items or on reporting monetary items of the scheme at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise. Investments in units of the foreign fund are stated at the Net Asset Value as last declared by the foreign fund and translated into Indian rupees at the rate of exchange prevalent on the date of valuation/balance sheet. (d) (e) Revenue recognition Interest income is recognised on an accrual basis.. Profit or loss on sale/redemption of investments is determined on the basis of the weighted average cost method. 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 gain or loss, if any, between two balance sheet dates is recognised in the revenue account and thereafter net unrealised gain, if any, is transferred to unrealised appreciation reserve. The loss on investments sold/transferred during the period is charged to the revenue account. Dividend income is recognised on the exdividend date and translated into Indian rupees at the rate of exchange prevalent on the exdividend date. Dividend income on foreign securities are recognised net of applicable taxes withheld in the respective countries. Equalisation account The purpose of equalization account is to maintain per unit amount of a Plan s/option s share of the Scheme s undistributed income, so that continuing unit holders share of undistributed income remains unchanged on issue or redemption of units under that Plan/Option. Pursuant to SEBI circular dated March 15, 2010, the method of calculating equalization per unit w.e.f. that date viz: a) When the sale price is higher than the face value of the unit, the total accumulated undistributed income (including realized gains) till the date of the transaction is determined. Based on the number of units outstanding on the transaction date, the undistributed income (including realized gains) associated with each unit is computed. The per unit amount so determined is credited and debited to the equalization account on issue and redemption of each unit respectively. b) When the sale price is lower than the face value of the unit, the difference between the Net asset value and the par value is debited and credited to the equalization account on issue and redemption of unit respectively. (f) Load charges In accordance with the SEBI Circular no. CIR/IMD/DF/21/2012 dated September 13, 2012, entire amount of Exit load/ CDSC collected is credited to the respective scheme net of taxes to the respective schemes as "Other Income", as against the earlier practice of crediting any amount more than 1% of the exit load to the respective schemes as "Other Income" and balance towards marketing and selling expenses. (g) Investor education and awareness initiatives In accordance with SEBI Circular no. CIR/IMD/DF/21/2012 dated September 13, 2012, the fund is accruing 0.02% p.a. on daily net assets towards investor education and awareness initiatives. Unutilised amount is carried forward to the subsequent period. Interest earned, if any, by investment of unutilized Investor Education amount in Fixed deposits, is credited to the Investor Education Liability (THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016 FRANKLIN INDIA FEEDER FRANKLIN EUROPEAN GROWTH FUND Schedules March 31, 2016 Quantity Period ended March 31, 2015 March 31, 2016 Amount Period ended March 31, 2015 3 UNIT CAPITAL Units of Rs 10 each fully paid up Growth Plan Outstanding, beginning of year/period 42,619,583.800 426,195 Initial offering 51,509,317.407 515,093 Issued during the year/period 3,778,621.471 14,708,119.428 37,786 147,081 Redeemed during the year/period (15,295,813.354) (23,597,853.035) (152,958) (235,979) Outstanding, end of year/period 31,102,391.917 42,619,583.800 311,023 426,195 Dividend Plan Outstanding, beginning of year/period 9,630,239.964 96,302 Initial offering 6,187,239.432 61,872 Issued during the year/period 336,267.290 5,444,738.820 3,363 54,447 Redeemed during the year/period (1,032,110.395) (2,001,738.288) (10,321) (20,017) Outstanding, end of year/period 8,934,396.859 9,630,239.964 89,344 96,302 Direct Growth Plan Outstanding, beginning of year/period 2,868,912.930 28,689 Initial offering 1,356,912.567 13,569 Issued during the year/period 1,036,679.792 1,848,048.726 10,367 18,480 Redeemed during the year/period (731,326.111) (336,048.363) (7,313) (3,360) Outstanding, end of year/period 3,174,266.611 2,868,912.930 31,743 28,689 Direct Dividend Plan Outstanding, beginning of year/period 270,117.138 2,702 Initial offering 347,259.421 3,473 Issued during the year/period 144,175.299 111,965.158 1,442 1,120 Redeemed during the year/period (96,582.578) (189,107.441) (966) (1,891) Outstanding, end of year/period 317,709.859 270,117.138 3,178 2,702 Total Outstanding, beginning of year/period 55,388,853.832 553,888 Initial offering 59,400,728.827 594,007 Issued during the year/period 5,295,743.852 22,112,872.132 52,958 221,128 Redeemed during the year/period (17,155,832.438) (26,124,747.127) (171,558) (261,247) Outstanding, end of year/period 43,528,765.246 55,388,853.832 435,288 553,888
SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016 FRANKLIN INDIA FEEDER FRANKLIN EUROPEAN GROWTH FUND Schedules March 31, 2016 Period ended March 31, 2015 4. RESERVES AND SURPLUS Unit premium reserve Balance, beginning of year 30,529 Net premium on issue of units 25,513 30,529 Balance, end of year 56,042 30,529 Unrealised appreciation reserve Balance, beginning of year 42,570 Change in net unrealised appreciation in value of investments (42,570) 42,570 Balance, end of year 42,570 Retained surplus Balance, beginning of year Net surplus / ( Deficit ) transferred from revenue account 27,237 Balance, end of year 27,237 Total reserves and surplus 83,279 73,099 5. CURRENT LIABILITIES AND PROVISIONS Current Liabilities Management fees 250 2,171 Trusteeship fees 1 1 Registrar service charges 38 55 Investor Education Liability 40 52 Sundry creditors for units redeemed by investors 20,487 6,331 Unclaimed redemption payable 44 3 Units Pending allotment 2 Other current liabilities 88 1,007 20,948 9,622 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: Units of European Mutual Fund appreciation 42,570 depreciation 16,235 Units of European Mutual Fund (due to foreign exchange fluctuation) appreciation depreciation 28,103 102,229 (iii) The aggregate value of investments purchased and sold by the Scheme during the year and these amounts as a percentage of average daily net assets are as follows: Purchases amount 14,617 763,206 as a percentage of average daily net assets 3.26 130.68 Sales amount 129,815 194,217 as a percentage of average daily net assets 28.96 33.26 7. OTHER CURRENT ASSETS Cash and Bank Balance Balances with banks in current accounts 330 1,010 Unclaimed dividend bank account 3 Unclaimed redemption bank account 41 CBLO/ Reverse Repo Lending Collateralised lending/reverse repo 2,830 4,154 Unclaimed Redemption CBLO 3 Others Sundry debtors for units issued to investors 25 417 Outstanding and accrued income 1 1 Contracts for sale of investments 20,059 4,360 Margin Money 32 43 371 1,013 2,833 4,154 20,117 4,821 TOTAL 23,321 9,988
SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016 FRANKLIN INDIA FEEDER FRANKLIN EUROPEAN GROWTH FUND Schedules March 31, 2016 Period ended March 31, 2015 8. NET DEFICIT Balance, beginning of year 143,992 Deficit transferred from revenue account (143,992) Balance, end of year 143,992 143,992 9. INTEREST On Debentures and bonds (5) On Collateralised lending / Reverse repo 245 907 240 907 10. 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 amount (9,837) (18,352) as a percentage of average daily net assets (2.19) (3.63) Expenditure amount 7,968 8,800 as a percentage of average daily net assets Regular Plan 1.87 1.78 Direct Plan 0.52 0.54 Management Fees (including service tax) amount 3,622 3,491 as a percentage of average daily net assets Regular Plan 0.85 0.71 Direct Plan 0.32 0.26 Trusteeship Fees (including service tax) amount 13 15 as a percentage of average daily net assets 0.003 0.003 11. NET ASSET VALUE Net asset value of each unit of Rs. 10 of the Scheme Growth Plan (Rs) 8.5884 8.7147 Direct Growth Plan (Rs) 8.7976 8.8126 Dividend Plan (Rs) 8.5884 8.7147 Direct Dividend Plan (Rs) 8.7976 8.8126 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. 12. SEGMENT REPORTING The scheme operates only in one segment viz. to primarily generate returns, based on schemes' investment objective. 13. PRIOR YEAR COMPARATIVES These financial statements have been prepared for the period from April 01, 2015 to March 31, 2016, whereas the previous period was from May 19, 2014 to March 31, 2015. 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. (THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
SCHEDULES TO THE BALANCE SHEET AND REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016 14. SUPPLEMENTARY INVESTMENT PORTFOLIO INFORMATION AND INDUSTRYWISE CLASSIFICATION Details of the Scheme's investments in each category of investments as at March 31, 2016 are presented below. The company exposure are stated as a percentage of the Scheme's net assets as at March 31, 2016, as well as the aggregate investments in each investment category. Franklin India Feeder Franklin European Growth Fund Industry and Company Particulars Quantity Market Value Percentage to Net Assets Percentage to Investment Category Foreign Mutual Fund Units 177,066 372,202 99.36 100.00 FTIF Franklin European Growth Fund, Class I (Acc) 177,066 372,202 99.36 100.00 Total 372,202 99.36 100.00 OTHER CURRENT ASSETS 23,321 6.23 TOTAL ASSETS 395,523 105.59 LESS : CURRENT LIABILITIES 20,948 5.59 NET ASSETS 374,575 100.00
HISTORICAL PER UNIT STATISTICS FRANKLIN INDIA FEEDER FRANKLIN EUROPEAN GROWTH FUND Year ended Period ended March 31, 2016 March 31, 2015 (a) Net Asset value, per unit Growth Option 8.5884 8.7147 Direct Growth Option 8.7976 8.8126 Dividend Option 8.5884 8.7147 Direct Dividend Option 8.7976 8.8126 (b) Gross Income: i) Income other than profit on sale of investment, per unit 0.02 0.05 ii) Profit / (Loss) on interscheme sale/transfer of investment, per unit iii) Profit / (Loss) on sale of investment to third party, per unit (0.24) (0.48) iv) Gain/(Loss) on Foreign exchange Fluctuation (0.01) 0.11 v) Transfer to Revenue Account from past year's reserve per unit (c) (d) Aggregate of expense, write offs, amortisation and charges, per unit (0.18) (0.16) Net unrealised appreciation/(depreciation) in value of investments (1.35) 0.77 (e) Net unrealised appreciation/(depreciation) 1.70 (1.85) due to Foreign Exchange Fluctuation per unit (f) Net Income, per unit (including appreciation/depreciation) (0.06) (1.56) (f) i) Highest traded price N.A. N.A. ii) Lowest traded price N.A. N.A. iii) Highest repurchase price/nav # Growth Option 9.6822 10.2795 Direct Growth Option 9.8057 10.2991 Dividend Option 9.6822 10.2795 Direct Dividend Option 9.8057 10.2991 iv) Highest resale price # Growth Option 9.7800 10.3833 Direct Growth Option 9.9047 10.4031 Dividend Option 9.7800 10.3833 Direct Dividend Option 9.9047 10.4031 v) Lowest repurchase price/nav # Growth Option 7.7007 8.0256 Direct Growth Option 7.8728 8.0953 Dividend Option 7.7007 8.0256 Direct Dividend Option 7.8728 8.0953 vi) Lowest resale price # Growth Option 7.7785 8.1067 Direct Growth Option 7.9523 8.1771 Dividend Option 7.7785 8.1067 Direct Dividend Option 7.9523 8.1771 Ratio of Expenses to Average Net Assets Regular Plan 1.87 1.78 Direct Plan 0.52 0.54 Ratio of Gross Income to Average Net Assets 1.24 (13.36) (g) P.E. Ratio N.A. N.A. # Per unit calculation is based on number of units at the end of the year. The highest and lowest resale price has been determined, after adding to the NAV, the maximum entry load applicable.