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Templeton Mutual FundAnnual Report 2000-2001

1A n n u a l R e p o r t

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Letter of the Country Head ................................. 2

Report of the Trustee ............................................. 4

Portfolio Managers� Report -

Templeton India Growth Fund ............................ 6


Franklin Equity Funds ........................................... 8


All Debt Funds ......................................................... 10

Templeton India Growth Fund (TIGF)

Auditors' Report .................................................. 14

Balance Sheet .................................................... 15

Revenue Account ............................................... 16

Notes to the Financial Statements ............... 17

Historical per Unit Statistics ............................ 23

Franklin India Growth Fund (FIGF)

Auditors' Report .................................................. 25

Balance Sheet .................................................... 26

Revenue Account ............................................... 27



Franklin India Index Fund (FIIF)

Auditors' Report .................................................. 35

Balance Sheet .................................................... 36

Revenue Account ............................................... 37



Franklin India Index Tax Fund (FITF)

Auditors' Report .................................................. 45

Balance Sheet .................................................... 46

Revenue Account ............................................... 47



Contents

Page

No.

Page

No.

Franklin India Balanced Fund (FIBF)

Auditors' Report .................................................. 55

Balance Sheet .................................................... 56

Revenue Account ............................................... 57



Templeton India Income Fund (TIIF)

Auditors' Report .................................................. 67

Balance Sheet .................................................... 68

Revenue Account ............................................... 69



Templeton Monthly Income Plan (TMIP)

Auditors' Report .................................................. 80

Balance Sheet .................................................... 81

Revenue Account ............................................... 82



Templeton India Government

Securities Fund (TGSF)

Auditors' Report .................................................. 93

Balance Sheet .................................................... 94

Revenue Account ............................................... 95



Templeton India Liquid Fund (TILF)

Auditors' Report .................................................. 103

Balance Sheet .................................................... 104

Revenue Account ............................................... 105



Unitholders� Information ....................................... 112

Dividend History Since Inception ...................... 115

Franklin Templeton Service Centres ................ 116


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Dear Investor,

Greetings from Franklin Templeton!

The Year 2000-2001 was truly eventful, as the markets seemed to be wrecked by volatility anduncertainty. The ruthless downturn in the last quarter of the year has left behind a feeling of widespreadgloom and disappointment, led by the fall in the global benchmark indices NASDAQ & Dow Jonesthat came off by 59.76% and 9.55% during the past one year. Coupled with the political and capitalmarket scandals, the BSE Sensex followed suit declining sharply by 41.40% from its peak of 6150 inFebruary last year.

Consequently, the Mutual Funds industry was also negatively affected. The industry's assets undermanagement declined by 20% in 2000-2001 to above Rs. 90,500 crores. The private sector grew byjust 3%, compared to a growth of 265% in the previous year. Amidst this, I am happy to share withyou that Franklin Templeton's assets grew by over 55% during the year from Rs. 1,559 crores (as onMarch 31, 2000) to Rs. 2,426 crores (as of March 31, 2001). With a sharp focus on risk-adjusted returnsand superior client service, we have been one of the fastest growing mutual funds in the country inthe last year.

I am also delighted to share with you that Franklin Templeton won the CNBC India-BNP Paribas awardin association with S&P - Mircopal# for the Best Mutual Fund House for the year 2000. In addition,our flagship equity fund, Templeton India Growth Fund (TIGF), won the award for the Best Openend Equity Fund in the one year category and our flagship debt fund, Templeton India Income Fund(TIIF) - Growth Plan, for the Best open end Debt Fund in the three year category. During the year,TIIF also won several other awards. The first Quarter 2001 also saw TIGF achieve the Economic Times -Crisil CPR 1# ranking indicating very good performance in the equity funds category. These awardsare a clear recognition of our long-cherished values of choosing the long-term, disciplined and teamapproach to managing our funds and business.

# For Methodology and Criteria of the ranking, please refer to page 3.

In keeping with the global change, during the year, we moved to our new brand identity - FranklinTempleton Investments. We believe that our new name better represents our diverse product offerings,both globally and in India. It also brings alive the availability of both growth-oriented and value-oriented investing styles from one investment management firm. With Franklin Templeton Investments,investors can partake of two investment strategies that very well complement each other and can betterprotect their investment portfolios with the potential to generate healthy risk-adjusted returns.

To further increase investment choices among the Franklin Templeton basket of funds, we launchedthree new funds this year. The Franklin India Index Fund (FIIF) - an Open-End Index-Linked GrowthFund, the Franklin India Index Tax Fund (FITF) - an Open-End Equity-Linked Savings Scheme ELSS,and Franklin India Balanced Fund (FIBF) - an Open-End Balanced Fund. As of March 31, 2001, wehad nine open-ended funds to suit differing needs of investors.

Looking ahead, we continue to be optimistic about the prospects of the mutual fund industry. Therecent Budget was significantly beneficial to the mutual funds industry. The reduction in interest rateson small savings by 1.5%, TDS on bank deposits becoming applicable over Rs. 5,000 instead ofRs. 10,000 earlier and deduction under Section 80 L of IT Act 1961 reducing from Rs. 12,000 to Rs. 9,000will be catalysts towards a wider retail participation, particularly in debt-based Mutual Funds. Further,

Letter of the Country Head


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the effective dividend tax, including surcharge on debt mutual funds, has been reduced from 22% to10.2%. The reduction in dividend distribution tax will improve the post-tax returns from mutual funds.Dividends, however, continue to be tax-free in the hands of the investors in the case of all mutualfunds. Also, a number of steps have been announced to initiate a meaningful and more professionalset up for pension funds management in the country.

On the international front, Franklin Resources, Inc. (the holding company for the Franklin TempletonGroup) acquired Fiduciary Trust Company International based in the United States. Fiduciary TrustInternational has long been recognised for its excellence in separately managed global investment forinstitutions and high net worth individuals. The combined entity had approximately $216 billion inassets under management worldwide as of March 31, 2001. Together the two will focus exclusivelyon meeting the investment management and service needs of financial advisors, private clients andinstitutions worldwide.

At Franklin Templeton, we continue to invest in building technology capabilities to further enhancecustomer service. We have also undertaken several initiatives to build our web presence and are movingforward on our plans to offer online transaction capabilities to investors as well as to our financialrepresentatives who can transact online on behalf of investors. Lastly, we at Franklin Templetoncontinue to strive to maintain the highest levels of transparency and compliance towards protectingthe interest of the small investors.

We continue to be optimistic of the future and believe that mutual funds are emerging as a leadingnational savings vehicle and will soon be a household phenomenon.

Best regards,

Rajiv VijCountry Head

June 1, 2001

# Methodology and Criteria

CNBC India - BNP Paribas Mutual Fund Awards

The CNBC India - BNP Paribas Mutual Fund Awards were held in association with Standard & Poor and were announced for 1 year,3 year and 5 year periods ending December 2000.

The mutual fund of the year awards were based on Standard & Poor's methodology designed to identify excellence in relative investmentmanagement through unbiased and chronologically stable analysis fund results. The scheme of the year awards were calculated usingmethodology known as Relative Risk Adjusted Ratio. This calculation evaluates the performance of a scheme and the consistency of thatperformance relative to other schemes in the peer group sector. This enables schemes to be recognised for consistency of performancethroughout the whole period as against the traditional method of total return calculation which reflects the start and end period andnot periods in between. The number of funds/schemes considered in the categories were: Mutual Fund house award - 20; Equity (Openend), 1 year - 49; Debt (Open end) 3 years - 34; Sales loads were not considered in the computation of returns. Past performance isno guarantee of future results.

CRISIL Composite Performance Rank (CPR)

The CRISIL Composite Performance Rank (CPR) of Templeton India Growth Fund is "Very Good" in the Open Ended Equity Scheme- GeneralCategory, and ranks within the top 10% of the 19 schemes ranked in this category. The criteria used in computing the CRISIL CPR 1are Risk adjusted Return based on NAVs over the 2-year period ended March 31, 2001, Diversification, Liquidity and the Asset size ofthe scheme. The methodology does not take into account the entry and exit loads levied by the scheme and is no indication of theperformance that can be expected from the scheme in future.

Past performance may or may not be sustained in future.


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Report of the Trustee

Dear Investor,

We are pleased to present before you the Fifth Annual Report of Templeton Mutual Fund for the yearended March 31, 2001.

During the year under review, the mutual fund industry passed through very testing times. The assetsunder management of the industry declined from Rs. 1,07,946.10* crores as on March 31, 2000 toRs. 90,586.87* crores as on March 31, 2001. However, Templeton Mutual Fund (TMF) continued togrow and achieved a growth of over 55% for the year under review. The total assets under managementof Templeton Mutual Fund as on March 31, 2001 was at Rs. 2,426.27 crores as compared to Rs. 1,559.13crores as on March 31, 2000, resulting in a growth of Rs. 867.14 crores (56%) in the assets during theyear.

Further, Franklin Templeton won the following awards at a special ceremony organised by CNBC andBNP Paribas in association with S&P - Micropal# at Mumbai on February 13, 2001:

1. Best Mutual Fund House for the year 2000

2. Templeton India Growth Fund, won the award for the Best Open end Equity Fund in the one yearcategory

3. Templeton India Income Fund (Growth Plan), for the Best open end Debt Fund in the three yearcategory


During the year, SEBI continued to demonstrate its commitment in enhancing regulations governingthe capital markets including the mutual fund industry. During the year, with a view to strengthenthe mutual fund industry and improve the transparency in disclosures, SEBI issued several guidelinesas summarised below:

1. Valuation of non-traded/thinly-traded equity and debt securities, and identification and provisioningof NPAs

2. Maintaining records of investment decisions indicating the data, facts and opinion leading to theinvestment decision

3. New format for the disclosure of portfolio as well as half yearly results in order to provide theinvestors with meaningful information about the operations of the mutual fund and to help themin taking well informed investment decisions

4. Updation of Offer Documents on a continuous basis

5. Updation of NAVs on the AMFI website by 8.00pm every day

The Finance Minister continued with his pro-reforms agenda and unveiled strategies for the nextfinancial year in the Budget 2001. The budget contained many positive measures towards the growthof the mutual fund industry including reduction of dividend distribution tax from 22% to 10.2%.

* Source : SEBI website


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During the year, our product base has widened by the launch of three Equity Schemes viz. FranklinIndia Index Fund (FIIF), being a scheme tracking S&P CNX Nifty Index, Franklin India Balanced Fund(FIBF), a scheme investing in equities and debt markets with a choice of two investment plans andFranklin India Index Tax Fund (FITF). FITF is similar to FIIF but is available with Tax benefits underSection 88 of the Income Tax Act, 1961. As on March 31, 2001 we had 9 schemes with a total of 16different plans, tailor-made for different types of investors.

The details of different products along with their Investment Objectives is annexed and forms partof this Annual Report.

The Balance Sheet as on March 31, 2001 and the Revenue Account for the period ended March 31,2001 for Templeton India Growth Fund (TIGF), Templeton India Income Fund (TIIF), Templeton IndiaLiquid Fund (TILF), Templeton India Government Securities Fund (TGSF), Templeton Monthly IncomePlan (TMIP), Franklin India Growth Fund (FIGF), Franklin India Balanced Fund (FIBF), Franklin IndiaIndex Fund (FIIF) and Franklin India Index Tax Fund (FITF) are annexed to this report.

The Fund has declared dividends under various schemes of Templeton Mutual Fund, and a list of suchdividends is annexed and forms part of the Annual Report.

The reports of the portfolio managers reviewing the performance and describing the future outlookof the equity funds and the debt funds form part of this Annual Report.

Templeton Mutual Fund would like to thank the Government of India, the Securities and ExchangeBoard of India, the Reserve Bank of India and the Association of Mutual Funds in India for theirimmense support, co-operation and guidance during the current year. We are also thankful to ourFunds' Auditors, Custodian, Registrar & Transfer Agents, Bankers and all other service providers fortheir valued support.

We look forward to your continued support and assure you of our commitment to quality productsand service from Franklin Templeton.

Yours sincerely,

Templeton Trust Services Pvt. Ltd.

Samuel J. Forester, Jr.Chairman

June 1, 2001



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Portfolio Managers� Report - Templeton India Growth Fund

Dear Investor,

OVERVIEW

This is the annual report for the Templeton India Growth Fund (TIGF) covering the 12-month periodending March 31, 2001. Over the last twelve months, the Fund outperformed the BSE Sensex by 10.26percentage points due to its continued stance on value investing and thus superior stock selection.While the NAV of TIGF dropped by 17.67%, the BSE Sensex dropped by 27.93% during the same period.After a successful year of rebound and recovery during 1999, these past twelve months have seen Indiaas well as most other emerging markets giving back some of the gains. The significant correction inthe technology stock sector and the ripple effects on other capital market segments led to some volatilityin the performance of the Fund. The recent payment crisis in the Stock Exchanges and the politicalcrisis brought about by the Tehelka revelations exerted additional pressure on the stock market. Thestock market (as represented by the BSE Sensex) fell from 5001 at end-March 2000 to 3604 at end-March 2001.

INVESTMENT PHILOSOPHY

In the first quarter of 2001, CNBC India - BNP Paribas in association with Standard & Poor's-Micropal#

named Franklin Templeton India, the Best Mutual Fund House in India for its overall performancefor the year 2000. Further, the Templeton India Growth Fund was named the Best Equity Fund overa one-year performance period#. This recognition brings Templeton's value strategy back to theforefront. Last year, the popularity of technology/telecommunications-related stocks drew in hugeinvestments from our peers. Although those were trying times, we continued our emphasis on valueand remained disciplined which has helped the Fund outperform. Further, as on the report, TIGF hasbeen rated CPR 1 (Composite Performance Rank) by Economic Times - CRISIL Quarterly Mutual FundTracker# for the quarter ended March 2001.


We continue to be long-term, value-oriented investors and strictly adhere to this investment strategy.The Templeton India Growth Fund is a distinct equity fund in India that invests in undervaluedcompanies, whose value we believe, will eventually be recognised by the market.

POLITICAL AND ECONOMIC CONDITIONS

This period has seen extreme volatility in the markets and it may be time to address issues, whichimpact the market's future and investor confidence. Current conditions have also highlighted the needto embrace regulations that instill the confidence of the individual investor. The Securities and ExchangeBoard of India (SEBI) has, over the years, initiated several reform measures in the Stock Exchanges.Though these have gone a long way to increase transparency, the last few months have highlightedthe need for the next generation of stock market reforms.

Moving on to the budget, the backdrop of which was the realistic economic survey, which rightlypointed out that the overall economic situation was not very positive, especially after the Gujaratearthquake. Noteworthy were intentions to speed up the privatisation process. The provision of aframework for industries to undertake business decisions, to close down business units and retrenchlabour, by outlining an exit policy and labour reform was encouraging. The improvement in foreclosure


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laws is a very important step for financial institutions as has been learnt from the situation in Thailand.The Finance Minister has chosen to tackle these issues rather than mask them by providing compensatoryexemptions for poor policies. The provision of a solid roadmap, continuity in policy, unambiguouscommitment to privatisation and a realisation that a smaller Government is more desirable, by allowingbusinessmen to run businesses, by reducing Government interference and simplifying administrationmade this budget very positive. Although the budget was positive in spirit and rightly chose to presenta long term framework of planning, the continued downward movement in the stock market indiceshas left investors wondering about the importance of fundamentals in stock market movements, andbrought up issues such as the importance of settlement systems.

OUTLOOK

India continues to exhibit signs of recovery - the results of which should soon flow through to thestock market but insufficient momentum on the reform front continues to result in riskier investments.Actions, such as the opening up of the long-distance telephony, to ease foreign investment restrictionsdo indicate perseverance on the part of the government and we believe that this will improve investorconfidence. In order to strengthen the economy, we believe the government now needs to push aheadwith issues such as the privatisation of state enterprises and lowering the budget deficit that has beenplaguing the country.

We thank you for your continued interest and support.

J. Mark MobiusPresident - Emerging Markets Groups

Chetan SehgalDirector (Research)

Rakesh ParekhInvestment Analyst

June 1, 2001



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Portfolio Managers� Report - Franklin Equity Funds

Dear Investor,

The last twelve months were testing times for equity investors. The sharp decline in the market wasunprecedented and was widespread across stocks and sectors. Franklin India Growth Fund, launchedat the peak of the market in February 2000, faced the full brunt of the bear market. However, all Franklinequity funds have largely performed in line with the markets for the year ended March 31, 2001.

Scheme Name Performance

Since

1 Year (%) Inception (%)

Franklin India Balanced Fund (Div.) NA (24.17)Franklin India Balanced Fund (Gr.) NA (22.20)

Franklin India Index Fund NA (13.70)S&P CNX Nifty NA (12.92)

Franklin India Index Tax Fund NA (12.20)S&P CNX Nifty NA (13.04)

Franklin India Growth Fund (46.70) (46.07)*BSE 100 (41.71) (42.46)*

* Returns for periods greater than 1 year are calculated on a Compounded Annualised basis.Returns for schemes/ plans with dividend distributions are computed assuming reinvestment of all payouts atex-dividend NAV.


This massive erosion of wealth in the equity markets has undoubtedly shaken investor's faith in themarket. We have faced innumerable questions on our inability to predict such downslide. We havealso faced questions about letting the erosion happen without making any effort to protect thedownslide. We would like to take this opportunity to explain our viewpoint on the same.

We believe our mandate is to manage equity fundsby investing in equity markets. We believe thatasset allocation in various classes like debt andequity is done by the clients and their investmentadvisors. Our objective is to outperform the marketby remaining invested and not by remaining incash. While in the short term this may look likea monumental mistake, past experience has shownthat attempting to time the market has not necessarilyoutperformed investment decisions in the longterm.

Further, while our markets have declinedsignificantly, this decline needs to be seen incontext of the worldwide performance. NASDAQdeclined by about 70% last year and many othermarkets globally have declined between 40-70%.This bear phase is unleashed by the global slowdown

FIGF vs BSE 100

Past performance may or may not besustained in future.


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led by the US economy. The pace of slowdownof US economy is above most expectations.The dotcom / internet stocks which went beyondthe realm of conventional valuation norms crashedonce the funding support stopped. The technologyservices and telecom companies went in a tailspinas their consumers deferred or delayed spending.With the slowdown in the US and absence of anypowerful growth engine from Europe or Japan,the global economic outlook has looked pessimistic.This affected the equity markers adverselyworldwide.

Besides the impact of global slowdown, the Indianmarket had its own problems, which unfolded inthe most unfortunate manner. Natural calamitieslike the drought and the earthquake put the economyin a tight spot. Opening up of economy createdsevere competitive environment for Indian industries. Notwithstanding the limitation of coalitionpolitics, the Government presented a reform-oriented budget. The limitations of our democratic system,immaturish behavior of our political class and non-committal bureaucracy have kept the growth driversof economy restricted. The last straw came from the now familiar re-run of the stock market scam.The stark similarity between the 1992 and 2001 stock scam should lead to the entire chain of peopleright from the investors to the regulators to reflect on the risks involved in Indian equity markets.

During the past year we have built a portfolio of quality stocks, well diversified across various sectors.These companies were picked up after extensive research and screened through various financial andqualitative parameters. The present portfolio consists of companies with consistent track record of highprofitability growth and high return on capital. In the fast changing economic scenario we have paidextra attention to ensure that our portfolio doesn't suffer on fundamentals.

Having said that, we believe that it is darkest before the dawn. In this gloomy scenario the silver lininghas already started appearing. SEBI's decision to introduce rolling settlement in Indian equity marketswill establish real price discovery mechanism. Absence of carry forward and common settlement cyclewill reduce the excessive speculation. Introduction of insider trading rules will establish a healthy andinvestor friendly market. On the economic front, successive interest rate cuts and normal monsooncan add momentum to the growth. The real upside can potentially come from aggressive privatisationby the Government, which could unlock value from the public sector stocks.

We thank you for your continuous support and interest.

Nilesh ShahChief Investment Officer

Deepesh PandeyPortfolio Manager

June 1, 2001

FIIF vs NIFTY



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Portfolio Managers' Report - All Debt Funds

Dear Investor,

Last year was an eventful year. The Roller Coaster movement of interest rates reminded one of anamusement ride. The first half witnessed a high degree of volatility with significant rise in yields. Thesecond half witnessed a Bull Run which got somewhat corrected towards the end of the year. Thereasons for sharp volatility in the first half were: sharp jump in the international oil prices with theconsequent increase in oil pool deficit, concerns over the large fiscal deficit, pressure on the rupee,

increase in interest rates in US, and lower capitalinflows. The trigger for a turnaround in secondhalf was the highly successful issue of IndiaMillennium Deposits, which gathered more thanthe expected figure of USD 4-5 billion. Thecontainment of fiscal deficit at around the budgetestimate also helped in improving the marketsentiment. As in the last few years, RBI completedthe borrowing programme of Government of Indiawithout putting undue pressure on interest rates.In fact RBI was able to bring down the averagecost of primary issuance of Government of Indiadated securities from 11.77 % in the previous yearto 10.95 % during year ended March 31, 2001, adecline of over 80 basis points.

In terms of the performance of real economy,growth in GDP in the year ended March 31, 2001is likely to slowdown in the range of 5-5.5 % much

lower than around 6.5 % recorded in the previous two years. The overall growth of the industrial sectorhas also been adversely affected in the last year. The outlook for growth in GDP in the current yearis fraught with uncertainties due to unclear signs of revival in growth of output and investment. Theexternal environment in the current year is also significantly unfavourable as compared to the last yearsince growth in global GDP is expected to be substantially lower this year vis-à-vis last year. Howeverproactive steps taken by the US Federal ReserveBoard in terms of significant easing of interestrates may revive the slowing US economy.

The fixed income market is poised for significantdevelopment in coming years. The fiscal budgethas set a fiscal deficit target of 4.7 per cent. Thiswould be a first step in bringing down governmentdebt and ushering in an era of low inflation andlow interest rates. In Slack season credit policy for2001/2002 the RBI has reiterated its commitmentof providing adequate liquidity and maintainingcurrent stable interest rate environment with a biastowards softening as permitted by externalenvironment. The Indian fixed income market is

TILF-G vs MIBOR

TILF AVERAGE PORTFOLIO MATURITY



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poised for higher growth both qualitative as wellas quantitative with the introduction of ElectronicClearing System (ECS), Negotiated Dealing System(NDS) and Real time gross settlement (RTGS). Weare actively working with regulatory authorities toensure that mutual funds continue to take activepart in development of Indian Fixed Income Marketin the changed scenario.

We have consistently followed our investmentpolicy of minimising credit risk and liquidity riskand seeking to generate returns by efficientlymanaging interest rates. We consistently de-riskour portfolios for optimising risk adjusted return.In government securities portfolio, de-risking isachieved by investing in liquid and "on the run " securities. The Corporate bond portfolio is de-riskedby regular stress tests and relative value strategy. The attached chart indicates movement in averageportfolio maturity across all our debt funds.

The returns generated by various schemes during the year 2000-01 as compared to benchmark indicesare as under:

Scheme Name Return

Since

1 Year (%) 3 Years (%) Inception (%)

Templeton India Income Fund (Div.) 9.75 11.38* 12.43*

Templeton India Income Fund (Gr.) 11.31 13.07* 12.90*

Templeton India Govt. Securities Fund (Div.) 13.30 NA 14.11*

Templeton India Govt. Securities Fund (Gr.) 15.43 NA 16.52*

Templeton Monthly Income Plan (Growth) 5.45 NA 7.30*

Templeton Monthly Income Plan (Half Yly. Div.) 4.92 NA 5.11*

Templeton Monthly Income Plan (Mthly. Div.) 8.28 NA 8.36*

Templeton Monthly Income Plan (Qtly. Div.) 8.42 NA 8.25*

ISEC IBEX 13.10 14.02* 15.12*

Templeton India Liquid Fund (G) 9.90 NA 9.91*

Templeton India Liquid Fund (D) NA NA 7.31

MIBOR 8.96 NA NA

* Returns for periods greater than 1 year are calculated on a Compounded Annualised basis.Returns for schemes/ plans with dividend distributions are computed assuming reinvestment of all payouts atex-dividend NAV.


AVERAGE PORTFOLIO MATURITY


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It is heartening to note that TIIF, TILF and TGSFhave consistently outperformed the benchmarkindices.

The current year has started on a good note amongthe global interest rate reduction led by the US Fedand positive response by the RBI in form of CRRcuts. We shall continue with our strategy of managinginterest rates and de-risking portfolios to generateoptimum risk-adjusted return.

During the year our flagship debt fund, TempletonIndia Income Fund - Growth Plan, won the CNBC-BNP PARIBAS award for the Best Performing FixedIncome Fund for three year period based on Standard& Poor's Fund Services methodology.#

# For methodology and criteria of the ranking, please refer to page 3.

We thank you for your continued support in good and in volatile times.

Nilesh Shah

Chief Investment Officer

Shobhit Mehrotra

Assistant Vice President - Fixed Income

Gaurav Pradhan

Assistant Vice President - Fixed Income

TGSF/TIIF vs IBEX


TIGFTEMPLETONINDIA GROWTHFUND


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To the Trustee of

Templeton Mutual Fund - Templeton India Growth Fund :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - TEMPLETON INDIA GROWTH FUND as at March 31,

2001 and the related revenue account for the year then ended. Our audit was performed in accordance with generally

accepted auditing standards and, accordingly, included such tests of the accounting records and such other procedures as

we considered necessary in the circumstances. 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.

In our opinion, the accompanying financial statements referred to above give a true and fair view of the state of affairs of

TEMPLETON MUTUAL FUND - TEMPLETON INDIA GROWTH FUND as at March 31, 2001 and of its surplus for the year then

ended.

The balance sheet and the related revenue account are in agreement with the books of account and have been prepared in

conformity with the accounting policies and standards prescribed in the Ninth Schedule to the Securities and Exchange

Board of India (Mutual Funds) Regulations, 1996.

Arthur Andersen & Associates

Chartered Accountants

Mumbai Narayan K. Seshadri

June 1, 2001 Partner

Auditors' Report


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(All amounts in thousands of Rupees)

Note 2001 2000

SOURCES OF FUNDS

Unit capital 2(a) & 3 1,149,593 1,202,572

Reserves and surplus 2(a) & 4 154,444 655,893

Current liabilities 5 21,798 11,382

1,325,835 1,869,847

APPLICATION OF FUNDS

Investments in equity shares 2(b), 6 & 14 1,193,570 1,637,260

Deposits with scheduled banks 121,900 192,800

Other current assets 7 10,365 39,787

1,325,835 1,869,847

Balance Sheet as at March 31, 2001

The accompanying notes are an integral part of this Balance Sheet.

Arthur Andersen & Associates Templeton Trust Services Templeton Asset ManagementChartered Accountants Private Limited (India) Private Limited

Anand J. Vashi Rajan RahejaDirector Director

Bharat Doshi Deepak M. SatwalekarDirector Director

Narayan K. Seshadri Percy Jal Pardiwalla Rajiv VijPartner Director Country Head & Chief Executive Officer

Mumbai B. SwaminathanJune 1, 2001 Chief Operating Officer


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Revenue Account for the year ended March 31, 2001


Note 2001 2000

INCOME

Dividend 2(c) 25,418 27,548

Interest 8 13,702 4,949

Profit on sale/redemption of investments, net 2(c) 72,633 210,297

Change in net unrealised gain/loss in value of investments 2(b) & 6(ii) � 580,675

Other income � 239

111,753 823,708

EXPENSES AND LOSSES

Provision for net unrealised loss in value of investments 2(b) & 6(ii) 17,274 �

Management fee 9 16,529 15,084

Trusteeship fee 9 725 665

Custodian service charges 1,832 1,890

Registrar service charges 453 1,785

Commission to distributors 11 7,879 9,900

Audit fee 800 710

Publicity expenses � 74

Other operating expenses 6,826 1,935

52,318 32,043

Surplus for the year 59,435 791,665

Transfer from retained surplus, net 4 108,955 �

Equalisation (debit)/credit 2(d) (1,455) 964

Income distribution on capital account (166,935) �

Transfer to retained surplus � 792,629

The accompanying notes are an integral part of this Revenue Account.







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(All amounts in thousands of Rupees unless specified otherwise)

1. BACKGROUND

Templeton Mutual Fund - Templeton India Growth Fund ('the Scheme') was launched on August 19, 1996 as an open ended,growth oriented mutual fund scheme.

Templeton Mutual Fund ('the Fund') was established as a trust under the Indian Trusts Act, 1882, by way of a trust deeddated January 4, 1996 and a supplementary trust deed dated March 30, 1996 executed by Templeton International Inc,USA, the sponsor of the Fund. In accordance with the Securities and Exchange Board of India ('SEBI') (Mutual Funds)Regulations, 1996 ('the SEBI Regulations'), the Board of Directors of Templeton Trust Services Private Limited ('the Trustee')has appointed Templeton Asset Management (India) Private Limited ('the AMC') to manage the Fund's affairs and operate itsschemes.

The objective of the Scheme is to provide long term capital appreciation to its investors through investing its corpus primarilyin equity and equity related instruments.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared on an accrual basis of accounting, under the historical cost convention, as modifiedfor investments, which are 'marked-to-market'. The significant accounting policies, which are in accordance with the SEBIRegulations and have been approved by the Board of Directors of the AMC and the Trustee, are stated below.

(a) Unit capital

l Unit capital represents the net outstanding units at the balance sheet date.

l Upon issue and redemption of units, the net premium or discount to the face value of units is adjusted against theunit premium reserve of the Scheme, after an appropriate portion of the issue proceeds and redemption payoutsis credited or debited respectively to the equalisation account, a mandatory requirement for open ended mutualfund schemes.

(b) Investments

Accounting for investment transactions

l Purchase and sale of investments are recorded on the date of the transaction, at cost and sale price respectively,after considering brokerage, commission, and fees payable or receivable, if any.

l Right entitlements are recognised as investments on the ex-rights date.

l Bonus entitlements are recognised as investments on the ex-bonus date.

Valuation of investments

l Investments in securities which have traded during a period of thirty days prior to the balance sheet date are statedat the closing prices on the balance sheet date or the last trading day before the balance sheet date, as may beapplicable, on the stock exchange where a majority (in terms of value) of these securities are principally traded.

l All other investments are stated at their fair value as determined by the AMC in accordance with the SEBI Regulationsand approved by the Trustee.

l Following the issue of the Guidance Note on Accounting for Investments in the Financial Statements of MutualFunds by the Institute of Chartered Accountants of India (pursuant to the Eleventh Schedule of the SEBI Regulations),from the current year, net unrealised gain or loss in the value of investments is determined separately for eachcategory of investments. Further, the change in net unrealised loss, if any, between two balance sheet dates isrecognised in the revenue account and the change in net unrealised gain, if any, is adjusted in the unrealisedappreciation reserve.

Up to March 31, 2000, the change in the net unrealised gain or loss in the value of investments between twobalance sheet dates was determined on a portfolio basis and recognised in the revenue account. Had the Schemenot changed its basis of determining and disclosing the change in net unrealised gain and loss in the value ofinvestments, its surplus for the year ended March 31, 2001 would have been lower by Rs. 352.80 million and thetransfer from retained surplus to the revenue account would have been correspondingly higher by that amount.Consequently, this change has not, impacted the net assets of the Scheme as at March 31, 2001.

Notes to the Financial Statements for the year ended March 31, 2001


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(c) Revenue recognition

l Dividend income is recognised on the ex-dividend date.

l Profit or loss on sale of investments is determined on the basis of the weighted average cost method.

(d) Equalisation account

l The purpose of equalisation account is to maintain per unit amount of the Scheme's undistributed income earnedduring the accounting year, so that continuing unitholders' share of undistributed income remains unchanged onissue or redemption of units.

l When units are issued or redeemed, the total undistributed income from the beginning of the accounting year tothe date of the transaction is determined. Based on the number of units outstanding on the transaction date, theundistributed income associated with each unit is computed. The per unit amount so determined is credited anddebited to the equalisation account on issue and redemption of each unit respectively.

l At year end, the balance in the equalisation account is transferred to the revenue account.

2001 2000

3. UNIT CAPITAL

Units of Rs. 10 each fully paid up

Units outstanding, beginning of year:

120,257,152.820 (2000 � 100,683,021.908) 1,202,572 1,006,830

Units issued: 27,629,765.576 (2000 � 43,515,194.484) 276,298 435,152

Units redeemed: 32,927,656.146 (2000 � 23,941,063.572) (329,277) (239,410)

Units outstanding, end of year:

114,959,262.250 (2000 � 120,257,152.820) 1,149,593 1,202,572

4. RESERVES AND SURPLUS

Unit premium reserve/ (Accumulated unit discount)

Balance, beginning of year 39,279 (9,166)

Net premium/discount on issue/redemption of units (39,687) 48,445

Balance, end of year (408) 39,279

Unrealised appreciation reserve

Transfer from retained surplus 352,807 �

Change in net unrealised appreciation in value of investments in equity shares (352,807) �

Balance, end of year � �

Retained surplus

Balance, beginning of year 616,614 (176,015)

Transfer to unrealised appreciation reserve (352,807) �

Transfer (to)/from revenue account (108,955) 792,629

Balance, end of year 154,852 616,614

154,444 655,893

5. CURRENT LIABILITIES

Management fee � 443

Trusteeship fee � 19

Contracts for purchase of investments 11,989 76

Sundry creditors for units redeemed by investors 577 2,464

Other current liabilities 8,643 8,380

Unclaimed distributed income 589 �

21,798 11,382


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6. INVESTMENTS IN EQUITY SHARES

(i) The investments of the Scheme are registered in the name of the Fund for the benefit of the Scheme's unitholders.

(ii) Aggregate appreciation and depreciation in the value of equity shares are as follows:

2001 2000

� Appreciation 180,823 560,779

� Depreciation 198,098 207,972

(iii) The aggregate value of investments purchased and sold by the Scheme during the year is Rs. 713.48 million

(2000 � Rs. 972.28 million) [48 per cent (2000 � 71.6 per cent) of average daily net assets] and Rs. 859.73 million

(2000 � Rs. 863.09 million) [58 per cent (2000 � 63.56 per cent) of average daily net assets] respectively.

(iv) During the year ended March 31, 2001, the Scheme has invested in the equity shares of certain companies, which

have invested in some of the schemes of the Fund during a period of one year before or after the date of the Scheme's

investment, in excess of five per cent of those schemes' net assets. The Scheme's investments in these companies as

at March 31, 2001 are as follows:

2001 2000

Hughes Software Systems Limited 58,478 �

Hero Honda Motors 56,140 �

Housing Development Finance Corporation Limited 38,140 122,048

Tata Power Company Limited 26,770 �

Indian Aluminium Company Limited 9 14,755

HCL Technologies Limited � 119,466

Asian Paints (India) Limited � 46,781

179,537 303,050

The aggregate of such purchases made by the Scheme (other than by inter-scheme transfer/sale) in the above companies

during the year ended March 31, 2001 are as follows:

Tata Power Company Limited 45,378

Indian Aluminium Company Limited 287

45,665

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

Balances with banks in current accounts 1,670 1,006

Contracts for sale of investments � 28,712

Outstanding and accrued income 66 1,575

Sundry debtors for units issued to investors 7,401 4,344

Other current assets 1,228 4,150

10,365 39,787


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2001 2000

8. INTEREST

Deposits with banks 2,825 3,751

Call money lending 10,877 505

Debentures � 693

13,702 4,949

9. MANAGEMENT AND TRUSTEESHIP FEE

The Scheme pays fees for investment management services under an agreement with the AMC, which provides for computation

of such fee at an annual rate of 1.25 per cent of the Scheme's average daily net assets, excluding the net asset value of the

AMC's investment in the Scheme, up to Rs. 1 billion and at an annual rate of 1 per cent of the average daily net assets,

excluding the net asset value of the AMC's investment in the Scheme, in excess of that amount.

Fees for trusteeship services are payable to the Trustee at an annual rate of 0.05 per cent of the Scheme's average daily net

assets.

10. INCOME AND EXPENDITURE

The gross total income and expenditure (excluding any unrealised gains and realised and unrealised losses) and these

amounts as a percentage of the Scheme's average daily net assets are provided below:

2001 2000

Income

� amount 111,753 243,033

� as a percentage of average daily net assets 7.53 17.89

Expenditure

� amount 35,044 32,043


11.RELATED PARTY TRANSACTIONS

Included in Commission to distributors is Rs. 1.77 million (2000 � Rs. 2.02 million) as commission to Spur Cable and

Datacom Private Limited (formerly Hathway Securities Limited), a subsidiary of Hathway Investments Private Limited

(formerly Hathway Investments Limited) ('HIPL'), for procuring unit subscriptions for the Scheme. HIPL holds 24.99 per cent

(2000 � 24.99 per cent) of the share capital of the AMC. The commission is at rates similar to those offered to other

distributors by the Scheme.

12.NET ASSET VALUE2001 2000

Net asset value of each unit of Rs 10 of the Scheme Rs. 11.34 Rs. 15.45

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.PRIOR YEAR COMPARATIVES

Prior year amounts have been reclassified, wherever necessary, to conform to current year�s presentation.


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14.SUPPLEMENTARY INVESTMENT PORTFOLIO INFORMATION AND INDUSTRYWISE

CLASSIFICATION

Details of investment portfolio and industrywise classification of the Scheme's investments in equity shares as at March 31,

2001 are presented below. The industry and company exposures are stated as a percentage of the Scheme's net assets as

at March 31, 2001, as well as the aggregate investments in equity shares.

Percentage Percentage

to to investment

Industry and company particulars Quantity Amount Net Assets category

EQUITY SHARES

IT Consulting and Services 417,480 187,055 14.35 15.67

Satyam Computer Services Limited 280,000 65,492 5.03 5.49

Hughes Software Systems Limited 90,000 58,478 4.48 4.90

Infosys Technologies Limited 9,000 36,746 2.82 3.07

SSI Limited 27,500 18,475 1.42 1.55

NIIT Limited 10,980 7,864 0.60 0.66

Commodity Chemicals 496,116 168,448 12.92 14.11

Reliance Industries Limited 320,000 125,088 9.60 10.48

Asian Paints (India) Limited 176,116 43,360 3.32 3.63

Aluminium 1,081,900 118,014 9.05 9.89

Hindalco Industries Limited 81,800 63,105 4.84 5.29

National Aluminium Company Limited 1,000,000 54,900 4.21 4.60

Indian Aluminium Company Limited 100 9 0.00 0.00

Packaged Foods 210,000 84,409 6.47 7.07

Smithkline Beecham Consumer Healthcare Limited 160,000 59,104 4.53 4.95

Nestle India Limited 50,000 25,305 1.94 2.12

Oil and Gas Refining and Marketing 465,100 83,695 6.42 7.01

Bharat Petroleum Corp. Limited 300,000 57,180 4.39 4.79

Hindustan Petroleum Corporation Limited 165,100 26,515 2.03 2.22

Integrated Telecommunication Services 370,000 76,100 5.84 6.37

Videsh Sanchar Nigam Limited 170,000 49,640 3.81 4.15

Mahanagar Telephone Nigam Limited 200,000 26,460 2.03 2.22

Tobacco 85,000 69,224 5.31 5.80

ITC Limited 85,000 69,224 5.31 5.80

Industrial Conglomerate 264,263 65,828 5.05 5.52

Grasim Industries Limited 264,263 65,828 5.05 5.52

Pharmaceuticals 64,669 60,626 4.65 5.07

Cipla Limited 55,269 55,203 4.23 4.62

Ranbaxy Laboratories Limited 9,400 5,423 0.42 0.45

Motorcycle Manufacturers 400,000 56,140 4.31 4.70

Hero Honda Motors Limited 400,000 56,140 4.31 4.70

Consumer Finance 70,000 38,139 2.92 3.20

Housing Development Finance Corporation Limited 70,000 38,139 2.92 3.20

Industrial Machinery 590,000 34,220 2.62 2.87

Cummins India Limited 590,000 34,220 2.62 2.87

Auto Parts and Equipments 12,338 33,273 2.55 2.79

Motor Industries Company Limited 12,338 33,273 2.55 2.79

Electric Utilities 270,000 26,771 2.05 2.24

Tata Power Company Limited 270,000 26,771 2.05 2.24


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Hotels 100,709 25,651 1.97 2.15

Indian Hotels Company Limited 100,709 25,651 1.97 2.15

Heavy Electrical Equipment 131,974 18,929 1.45 1.59

Bharat Heavy Electricals Limited 130,000 18,460 1.41 1.55

Asea Brown Boveri Limited 1,974 469 0.04 0.04

Broadcasting and Cable TV 140,000 17,024 1.31 1.43

Zee Telefilms Limited 140,000 17,024 1.31 1.43

Banks 375,000 14,981 1.15 1.26

Oriental Bank of Commerce 375,000 14,981 1.15 1.26

Apparel and Accessories 217,486 9,036 0.69 0.76

Titan Industries Limited 217,486 9,036 0.69 0.76

Automobile Manufacturers 50,000 6,007 0.45 0.50

Mahindra and Mahindra Limited 50,000 6,007 0.45 0.50

Total 1,193,570 91.53 100.00

DEPOSITS 121,900 9.35

OTHER CURRENT ASSETS 10,365 0.79

TOTAL ASSETS 1,325,835 101.67

LESS: CURRENT LIABILITIES 21,798 1.67

NET ASSETS 1,304,037 100.00


to to investment



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Historical per Unit Statistics

As at As at As at

31-Mar-01 31-Mar-00 31-Mar-99

Rs. Rs. Rs.

a) Gross Income per unit

i) Income other than profit on sale of investment, per unit 0.34 0.27 0.31

ii) Income from profit on Inter Scheme sales/transfer

of investment, per unit 0.00 0.00 0.00

iii) Income from profit on sale of investment to

third party, per unit 0.63 1.75 0.24

iv) Transfer to revenue account from past year�s reserve, per unit 0.00 0.00 0.00

b) Less : Aggregate of expenses, write off, amortisation and

charges, per unit (0.30) (0.27) (0.56)

c) Less : Unrealised depreciation in value of investments, per unit (0.15) 0.00 (1.68)

d) Add : Unrealised appreciation in value of investments, per unit 0.00 4.83 0.28

e) Net Income per unit 0.52 6.58 (1.41)

Add : Equalisation Credit & Unit Premium Reserve (0.02) 0.33 (0.43)

Reserve of the previous year 2.29 (1.46) 0.00

Less : Dividend Distribution and Dividend Tax (1.45) 0.00 0.00

Growth per Unit 1.34 5.45 (1.84)

f) Net Asset Value, per unit 11.34 15.45 8.16

g) Repurchase Prices during the period

i) Highest 15.94 17.56 10.99

ii) Lowest 10.82 6.86 6.76

h) Resale Prices during the period *

i) Highest 16.27 17.92 11.69

ii) Lowest 11.04 7.00 6.90

i) Ratio of expenses (excluding realised and unrealised losses)

to average daily net assets (%) 2.36 2.36 2.47

Ratio of gross income (excluding realised and unrealised income)

to average daily net assets (%) 7.53 17.89 3.88

j) P. E. Ratio N.A. N.A. N.A.

* The highest and lowest sale price of the units of the scheme has been determined after adding to the highest and lowest

NAV, the maximum sales load applicable.

FIGFFRANKLININDIA GROWTHFUND

To the Trustee of

Templeton Mutual Fund - Franklin India Growth Fund :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - FRANKLIN INDIA GROWTH FUND as at March 31, 2001

and the related revenue account for the year then ended. Our audit was performed in accordance with generally accepted

auditing standards and, accordingly, included such tests of the accounting records and such other procedures as we considered

necessary in the circumstances. 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.


TEMPLETON MUTUAL FUND - FRANKLIN INDIA GROWTH FUND as at March 31, 2001 and of its deficit for the year ended

March 31, 2001.








Auditors' Report


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Note 2001 2000

SOURCES OF FUNDS

Unit capital 2(a) & 3 473,151 403,599


491,838 455,530


Investments in equity shares 2(b), 5 & 12 228,868 331,384



Net deficit 223,640 29,714

Accumulated unit discount, net 2(a) & 7 16,386 764

491,838 455,530









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Note 2001 2000

INCOME

Dividend 2(c) 3,199 �

Interest on call money lending 2,870 2,748

6,069 2,748

EXPENSES AND LOSSES

Change in provision for unrealised loss in value of investments 2(b) & 5(ii) 101,367 30,227

Loss on sale of investments, net 2(c) 90,597 1,049

Management fee 8 3,699 545


Custodian service charges 562 236

Registrar service charges 313 236

Commission to distributors 2,212 3

Publicity expenses 91 �

Audit fee 50 30

Other operating expenses 943 114

199,995 32,462

Deficit for the year 193,926 29,714

Net deficit, beginning of year 29,714 �

Net deficit, end of year 223,640 29,714

The accompanying notes are an integral part of this Revenue Account







M a r c h 3 1, 2 0 0 1


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1. BACKGROUND

Templeton Mutual Fund - Franklin India Growth Fund ('the Scheme') was launched on January 24, 2000 as an open ended,

equity growth mutual fund scheme.

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 and a supplementary trust deed dated March 30, 1996 executed by Templeton International Inc,

USA, the sponsor of the Fund. In accordance with the Securities and Exchange Board of India ('SEBI') (Mutual Funds)

Regulations, 1996 ('the SEBI Regulations'), the Board of Directors of Templeton Trust Services Private Limited ('the Trustee')

has appointed Templeton Asset Management (India) Private Limited ('the AMC') to manage the Fund's affairs and operate its

schemes.

The primary objective of the Scheme is to generate long term capital appreciation from a diversified portfolio invested

predominantly in growth oriented equity and equity related securities.


The financial statements are prepared on an accrual basis of accounting, under the historical cost convention, as modified

for investments, which are 'marked-to-market'. The significant accounting policies, which are in accordance with the SEBI

Regulations and have been approved by the Boards of Directors of the AMC and the Trustee, are stated below.

(a) Unit capital


l 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.

(b) Investments


l Purchase and sale of investments are recorded on the date of the transaction, at cost and sale price respectively,

after considering brokerage, commission, and fees payable or receivable, if any.




l Investments in securities which have traded during a period of thirty days prior to the balance sheet date are stated

at the closing prices on the balance sheet date or the last trading day before the balance sheet date, as may be

applicable on the stock exchange where a majority (in terms of value) of these securities are principally traded.

l All other investments are stated at their fair value as determined by the AMC in accordance with the SEBI Regulations

and related circulars, and approved by the Trustee.

l In accordance with the Guidance Note on Accounting for Investments in the Financial Statements of Mutual Funds

issued by the Institute of Chartered Accountants of India (pursuant to the Eleventh Schedule of the SEBI Regulations),

net unrealised gain or loss in the value of investments is determined separately for each category of investments.

Further, the change in 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.



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G r o w t h F u n d




Equalisation account

l The purpose of equalisation account is to maintain per unit amount of the Scheme's undistributed income earned

during the accounting period, so that continuing unitholders' share of undistributed income remains unchanged on

issue or redemption of units.

l When units are issued or redeemed, the total undistributed income from the beginning of the accounting period to

the date of the transaction is determined. Based on the number of units outstanding on the transaction date, the

undistributed income associated with each unit is computed. The per unit amount so determined is credited and

debited to the equalisation account on issue and redemption of each unit respectively.


2001 2000

3. UNIT CAPITAL


Units outstanding, beginning of year: 40,359,870.131 (2000 - Nil) 403,599 �

Units issued during the year : 16,367,642.498 (2000 � 43,791,852.686) 163,676 437,919

Units redeemed: 9,412,458.044 (2000 � 3,431,982.555) (94,124) (34,320)

Units outstanding, end of period: 47,315,054.585 (2000 � 40,359,870.131) 473,151 403,599


Management fee 83 84

Trusteeship fee 2 2

Contracts for purchase of investments 3,373 25,915

Sundry creditors for units redeemed by investors 882 2,022


18,687 51,931




2001 2000



(iii) The aggregate value of investments purchased and sold by the Scheme during the year is Rs 282.20 million

(2000 � Rs. 398.17 million) (86 per cent (2000 � 100 per cent) of average daily net assets) and Rs. 192.75 million

(2000 � Rs. 35.51 million) (59 per cent (2000 � 9 per cent) of average daily net assets) respectively.


M a r c h 3 1, 2 0 0 1


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2001 2000

Britannia Industries Limited 17,986 �

Hero Honda Motors Limited 8,842 11,640

Hughes Software Systems Limited 5,718 �


HCL Technologies Limited 2,507 �

Electrosteel Castings Limited � 5,926

39,412 34,729



Britannia Industries Limited 17,390

HCL Technologies Limited 11,265

Hughes Software Systems Limited 4,330

Hero Honda Motors Limited 3,854

36,839





Contracts for sale of investments 509 20,735

Outstanding and accrued income 187 44

Sundry debtors for units issued to investors 107 2,359

8,944 33,968

7. ACCUMULATED UNIT DISCOUNT, NET

Balance, beginning of year 764 �

Net premium/discount on issue/redemption of units 15,622 764

Balance, end of year 16,386 764




AMC's investment in the Scheme.


assets.


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G r o w t h F u n d


The gross total income and expenditure (excluding any realised and unrealised losses) and these amounts as a percentage

of the Scheme's average daily net assets are provided below:

2001 2000

Income

� amount 6,069 2,748


Expenditure

� amount 8,031 1,186


For the period ended March 31, 2000, on an annualised basis, the total income and expenditure were 3.70 per cent and

1.61 per cent respectively of the Scheme's average daily net assets.

2001 2000

10.NET ASSET VALUE

Net asset value of each unit of Rs. 10 of the Scheme Rs. 4.93 Rs. 9.25



11.PRIOR PERIOD COMPARATIVES

Prior period amounts have been reclassified, wherever necessary, to conform to current year's presentation. The prior period

amounts relating to the revenue account are for a period of approximately two months and are therefore not directly

comparable with current year amounts.


CLASSIFICATION





to to investment


EQUITY SHARES

Computers - Software 125,100 52,810 22.65 23.08



Polaris Software Limited 34,300 8,587 3.68 3.75


NIIT Limited 5,050 3,617 1.55 1.58

HCL Technologies Limited 6,800 2,507 1.08 1.10

Food and Dairy Products 61,657 31,135 13.36 13.61

Britannia Industries Limited 26,061 17,986 7.72 7.86



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Cipla Limited 17,500 17,479 7.50 7.64

Hoechst Marion Roussel Limited 25,723 11,704 5.02 5.11

Diversified 78,070 17,828 7.64 7.79


Pidilite Industries Limited 29,400 5,815 2.49 2.54

Hindustan Lever Limited 3,670 803 0.34 0.35

Telecommunications - Service Provider 79,000 15,083 6.47 6.59



Computers - Education 39,950 14,452 6.20 6.31

SSI Limited 16,750 11,253 4.83 4.91

Aptech Limited 23,200 3,199 1.37 1.40

Refineries 72,000 13,723 5.89 6.00

Bharat Petroleum Corporation Limited 72,000 13,723 5.89 6.00

Paints / Varnishes 46,000 11,325 4.86 4.95


Entertainment / Electronic Media Software 82,044 10,021 4.30 4.38


Television Eighteen India Limited 11,494 1,442 0.62 0.63

Automobiles - Motorcycles / Mopeds 63,000 8,842 3.79 3.86


Transport Road 48,251 6,859 2.94 3.00

Container Corporation of India 48,251 6,859 2.94 3.00

Engines 107,900 6,258 2.68 2.73


Electric Equipment 39,000 5,538 2.38 2.42


Banks and Financial Institutions 8,000 4,359 1.87 1.90

HDFC Limited 8,000 4,359 1.87 1.90

Castings - Grey Iron 14,454 1,452 0.62 0.63

Electrosteel Casting Limited 14,454 1,452 0.62 0.63

Total 228,868 98.17 100.00

DEPOSITS 14,000 6.01


TOTAL ASSETS 251,812 108.02


NET ASSETS 233,125 100.00


to to investment



M a r c h 3 1, 2 0 0 1


G r o w t h F u n d


As at As at

31-Mar-01 31-Mar-00

Rs. Rs.


i) Income other than profit on sale of investment, per unit 0.13 0.07

ii) Income from profit on Inter Scheme sales/transfer of investment, per unit 0.00 0.00

iii) Income from profit on sale of investment to third party, per unit (1.91) (0.03)

iv) Transfer to revenue account from past year�s reserve, per unit 0.00 0.00

b) Less : Aggregate of expenses, write off, amortisation and charges, per unit (0.17) (0.02)

c) Less : Unrealised depreciation in value of investments, per unit (2.14) (0.75)

d) Add : Unrealised appreciation in value of investments, per unit 0.00 0.00

e) Net Income per unit (4.10) (0.73)

Add : Equalisation Credit & Unit Premium Reserve (0.35) (0.02)

Reserve of the previous year (0.63) 0.00

Less : Dividend Distribution and Dividend Tax 0.00 0.00

Growth per Unit (5.07) (0.75)

f) Net Asset Value per unit 4.93 9.25


i) Highest 9.66 10.41

ii) Lowest 4.87 9.25


i) Highest 9.86 10.62



to average daily net assets (%) 2.44 1.61



j) P. E. Ratio N.A. N.A.



FIIFFRANKLININDIA INDEXFUND

To the Trustee of

Templeton Mutual Fund - Franklin India Index Fund :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - FRANKLIN INDIA INDEX FUND as at March 31, 2001 and

the related revenue account for the period from June 26, 2000 (the date of launch) to March 31, 2001. Our audit was

performed in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting

records and such other procedures as we considered necessary in the circumstances. 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.


TEMPLETON MUTUAL FUND - FRANKLIN INDIA INDEX FUND as at March 31, 2001 and of its deficit for the period from June

26, 2000 to March 31, 2001.








Auditors' Report


M a r c h 3 1, 2 0 0 1


I n d e x F u n d


M a r c h 3 1, 2 0 0 1


I n d e x F u n d


Note

SOURCES OF FUNDS

Unit capital 2(a) & 3 222,946

Current liabilities 4 7,790

230,736


Investments in equity shares 2(b), 5 & 11 184,505

Deposits with companies/ institutions 7,500

Other current assets 6 8,165

Net deficit 24,269

Accumulated unit discount, net 2(a) 6,297

230,736









M a r c h 3 1, 2 0 0 1


I n d e x F u n d

Revenue Account for the period from June 26, 2000 (the date of launch)to March 31, 2001








Note

INCOME

Dividend 2(c) 369

Interest on call money lending 2,094

Profit on sale of investments, net 2(c) 486

Other income 2

2,951

EXPENSES AND LOSSES

Provision for unrealised loss in value of investments 2(b) & 5(ii) 25,157

Loss on inter-scheme transfer/sale of investments, net 2(c) 28

Management fee 7 1,075

Trusteeship fee 7 13

Custodian service charges 243

Registrar service charges 69

Commission to distributors 498

Audit fee 10

Other operating expenses 127

27,220

Deficit for the period, transferred to balance sheet 24,269


M a r c h 3 1, 2 0 0 1


I n d e x F u n d


1. BACKGROUND

Templeton Mutual Fund - Franklin India Index Fund ('the Scheme') was launched on June 26, 2000 as an open ended,

passively managed index linked growth scheme, tracking the S&P CNX Nifty Index.






schemes.

The primary objective of the Scheme is to invest in companies whose securities are included in the S&P CNX Nifty Index and,

subject to tracking errors, endeavour to attain results commensurate with the S&P CNX Nifty Index.




Regulations and have been approved by the Board of Directors of the AMC and the Trustee, are stated below.

(a) Unit capital





fund schemes.

(b) Investments









applicable, on the stock exchange where a majority (in terms of value) of these securities are principally traded.


issued by the Institute of Chartered Accountants of India (pursuant to the Eleventh Schedule to the SEBI Regulations),

the net unrealised gain or loss in the value of investments is determined separately for each category of investments.

Further, the net unrealised loss, if any, is recognised in the revenue account and the net unrealised gain, if any, is

adjusted in an unrealised appreciation reserve.




Notes to the Financial Statements for the period from June 26, 2000(The date of launch) to March 31, 2001


M a r c h 3 1, 2 0 0 1


I n d e x F u n d



during the accounting year, so that continuing unitholders' share of undistributed income remains unchanged on


l When units are issued or redeemed, the total undistributed income from the beginning of the accounting year to





3. UNIT CAPITAL


Units issued:

� initial offer � 19,545,869.340 195,459

� during the period � 7,521,523.632 75,215

Units redeemed: 4,772,834.468 (47,728)

Units outstanding, end of period: 22,294,558.504 222,946


Contracts for purchase of investments 5,528

Other current liabilities 2,262

7,790




� Appreciation 5,806

� Depreciation 30,963

(iii) The aggregate value of investments purchased and sold by the Scheme during the period is Rs. 352.78 million (170 per

cent of average daily net assets) and Rs. 143.58 million (69 per cent of average daily net assets) respectively.





ICICI Limited 4,247

Housing Development Finance Corporation 3,988


Gujarat Ambuja Cements Limited 1,385



Tata Tea Limited 809

14,599


M a r c h 3 1, 2 0 0 1


I n d e x F u n d



ICICI Limited 11,532




Tata Tea Limited 872

16,833




Balances with banks in current accounts 113

Contracts for sale of investments 125

Outstanding and accrued income 3

Sundry debtors for units issued to investors 3,649

Other current assets 4,275

8,165






assets.




Income

� amount 2,951

� as a percentage of average daily net assets 1.42

Expenditure

� amount 2,035


On an annualised basis, the total income and expenditure are 1.86 per cent and 1.28 per cent respectively of the Scheme's

average daily net assets.

9. NET ASSET VALUE

Net asset value of each unit of Rs 10 of the Scheme Rs. 8.63




M a r c h 3 1, 2 0 0 1


I n d e x F u n d


As these are the first financial statements of the Scheme since the date of its launch, there are no prior year comparatives.


CLASSIFICATION





to to investment


EQUITY SHARES

Diversified 237,453 60,499 31.44 32.78

Hindustan Lever Limited 134,552 29,501 15.33 15.99


Larsen & Toubro Limited 15,231 3,367 1.75 1.82


Dabur India Limited 17,478 1,066 0.55 0.58




NIIT Limited 2,368 1,710 0.89 0.93

Digital Equipment (India) Limited 2,006 840 0.44 0.46


State Bank of India 32,252 6,484 3.37 3.51

ICICI Limited 48,126 4,247 2.21 2.30


HDFC Bank Limited 14,908 3,404 1.77 1.85

Oriental Bank of Commerce 11,799 470 0.24 0.25

Refineries 300,079 16,940 8.81 9.18

Reliance Petroleum Limited 270,836 13,203 6.86 7.15

Hindustan Petroleum Corporation Limited 20,794 3,340 1.74 1.81

Kochi Refineries Limited 8,449 397 0.21 0.22

Cigarettes 15,039 12,242 6.36 6.63

ITC Limited 15,039 12,242 6.36 6.63


Ranbaxy Laboratories Limited 7,102 4,084 2.12 2.21

Cipla Limited 3,675 3,668 1.91 1.99

Dr. Reddy�s Laboratories Limited 1,623 2,021 1.05 1.10

Glaxo India Limited 3,663 1,560 0.81 0.85

Novartis India Limited 1,952 529 0.27 0.29


Nestle India Limited 5,908 3,003 1.56 1.63


SmithKline Beecham Consumer Healthcare Limited 2,781 1,023 0.53 0.55



Aluminium 4,564 3,521 1.83 1.91

Hindalco Industries Limited 4,564 3,521 1.83 1.91




M a r c h 3 1, 2 0 0 1


I n d e x F u n d

Power Generation and Supply 20,915 2,825 1.47 1.53

BSES Limited 8,442 1,581 0.82 0.86

Tata Power Co. Limited 12,473 1,244 0.65 0.67

Cement 19,511 2,748 1.43 1.49

Gujarat Ambuja Cements Limited 9,016 1,384 0.72 0.75

Associated Cement Companies Limited 10,495 1,364 0.71 0.74

Steel 22,559 2,760 1.43 1.50

Tata Iron and Steel Company Limited 22,559 2,760 1.43 1.50

Personal Care 11,677 2,443 1.27 1.32

Colgate-Palmolive (India) Limited 8,334 1,296 0.68 0.70

Procter & Gamble Hygiene and Health Care Limited 1,326 735 0.38 0.40

Reckitt Benckiser (India) Limited 2,017 412 0.21 0.22

Electric Equipment - General 14,999 2,140 1.11 1.16


Lubricants - Blending 7,568 1,749 0.91 0.95

Castrol (India) Limited 7,568 1,749 0.91 0.95



Automobiles - Scooters and 3-Wheelers 6,201 1,602 0.83 0.87

Bajaj Auto Limited 6,201 1,602 0.83 0.87

Automobiles - LCVs / HCVs 15,683 1,024 0.53 0.56

Tata Engineering & Locomotive Company Limited 15,683 1,024 0.53 0.56

Paints / Varnishes 3,933 965 0.50 0.52

Asian Paints (India) Limited 3,933 965 0.50 0.52

Petrochemicals - Polymers 15,334 833 0.43 0.45

Indian Petrochemicals Corporation Limited 15,334 833 0.43 0.45

Automobiles - Tractors 6,771 812 0.42 0.44

Mahindra & Mahindra Limited 6,771 812 0.42 0.44

Tea 3,445 808 0.42 0.44

Tata Tea Limited 3,445 808 0.42 0.44

Hotels 2,765 694 0.36 0.38

Indian Hotels Company Limited 2,765 694 0.36 0.38

Electric Equipment 2,538 606 0.32 0.33

Asea Brown Boveri Limited 2,538 606 0.32 0.33

Soda Ash 11,070 424 0.23 0.23

Tata Chemicals Limited 11,070 424 0.23 0.23

Computers - Hardware 1,955 164 0.09 0.09

HCL Infosystems Limited 1,955 164 0.09 0.09

Total 184,505 95.91 100.00

DEPOSITS 7,500 3.90




NET ASSETS 192,380 100.00


to to investment



M a r c h 3 1, 2 0 0 1


I n d e x F u n d


As at

31-Mar-01 @

Rs.


i) Income other than profit on sale of investment, per unit 0.11

ii) Income from profit on Inter Scheme sales/transfer of investment, per unit (0.00)

iii) Income from profit on sale of investment to third party, per unit 0.02

iv) Transfer to revenue account of previous year�s reserve, per unit 0.00

b) Less : Aggregate of expenses, write off, amortisation and charges, per unit (0.09)

c) Less : Unrealised depreciation in value of investments, per unit (1.13)

d) Add : Unrealised appreciation in value of investments, per unit 0.00

e) Net Income per unit (1.09)

Add : Equalisation Credit & Unit Premium Reserve (0.28)

Reserve of the previous year 0.00

Less : Dividend Distribution and Dividend Tax 0.00

Growth per Unit (1.37)

f) Net Asset Value per unit 8.63


i) Highest 10.99

ii) Lowest 8.46


i) Highest 10.99

ii) Lowest 8.46

i) Ratio of expenses (excluding realised and unrealised losses) to average daily net assets (%) 1.28

Ratio of gross income (excluding realised and unrealised income) to average daily net assets (%) 1.86

j) P. E. Ratio N.A.



@ Since the Franklin India Index Fund was launched on June 26, 2000 the corresponding previous year's figures are not

available.

FITFFRANKLININDIA INDEXTAX FUND

To the Trustee of

Templeton Mutual Fund - Franklin India Index Tax Fund :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - FRANKLIN INDIA INDEX TAX FUND as at March 31, 2001

and the related revenue account for the period from February 26, 2001 (the date of launch) to March 31, 2001. Our audit

was performed in accordance with generally accepted auditing standards and, accordingly, included such tests of the

accounting records and such other procedures as we considered necessary in the circumstances. 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.


TEMPLETON MUTUAL FUND - FRANKLIN INDIA INDEX TAX FUND as at March 31, 2001 and of its deficit for the period from

February 26, 2001 to March 31, 2001.








Auditors' Report


M a r c h 3 1, 2 0 0 1


I n d e x T a x F u n d


M a r c h 3 1, 2 0 0 1




Note

SOURCES OF FUNDS

Unit capital 2(a) & 3 14,819

Current liabilities 4 142

14,961


Investments in equity shares 2(b), 5 & 11 12,559

Other current assets 6 590

Net deficit 1,592

Accumulated unit discount, net 2(a) 220

14,961









M a r c h 3 1, 2 0 0 1



Revenue Account for the period from February 26, 2001 (the date oflaunch) to March 31, 2001








Note

INCOME

Interest on call money lending 2

EXPENSES AND LOSSES

Provision for net unrealised loss in value of investments 2(b) & 5(ii) 1,575

Loss on inter-scheme transfer/sale of investments, net 2(c) 2

Management fee 7 3

Trusteeship fee 7 �

Audit fee 5


1,594

Deficit for the period, transferred to balance sheet 1,592


M a r c h 3 1, 2 0 0 1




1. BACKGROUND

Templeton Mutual Fund - Franklin India Index Tax Fund ('the Scheme') was launched on February 26, 2001 as an open ended

scheme, which is approved as an Equity Linked Savings Scheme to provide tax benefits under section 88 of the Income-tax

Act, 1961 for subscriptions up to Rs. 10,000 per annum. The Scheme is a passively managed index based growth scheme

tracking the S&P CNX Nifty Index.






schemes.

The primary objective of the Scheme is to invest in companies whose securities are included in the S&P CNX Nifty Index and,

subject to tracking errors, endeavour to attain results commensurate with the S&P CNX Nifty Index.




Regulations and have been approved by the Board of Directors of the AMC and the Trustee, are stated below.

(a) Unit capital





fund schemes.

(b) Investments












the net unrealised gain or loss in the value of investments is determined separately for each category of investments.

Further, the net unrealised loss, if any, is recognised in the revenue account and the net unrealised gain, if any, is

adjusted in an unrealised appreciation reserve.



Notes to the Financial Statements for the Period from February 26, 2001(the date of launch) to March 31, 2001


M a r c h 3 1, 2 0 0 1





during the accounting year, so that continuing unitholders' share of undistributed income remains unchanged on


l When units are issued or redeemed, the total undistributed income from the beginning of the accounting year to





3. UNIT CAPITAL


Units issued:

� initial offer - 1,113,800 11,138

� during the period - 368,145.741 3,681

Units outstanding, end of period: 1,481,945.741 14,819

At March 31, 2001, of the above unit capital, approximately 67.48 per cent is held by a single investor.


Management fee 3

Contracts for purchase of investments 125

Other current liabilities 14

142




� Appreciation 93



cent of average daily net assets) and Rs. 0.01 million (0.10 per cent of average daily net assets) respectively.





ICICI Limited 289

Housing Development Finance Corporation Limited 272

Hero Honda Motors Limited 118

Gujarat Ambuja Cements Limited 94

Tata Power Company Limited 85

Britannia Industries Limited 81

Tata Tea Limited 55

994




M a r c h 3 1, 2 0 0 1




Balances with banks in current accounts 26

Sundry debtors for units issued to investors 564

590






assets.




Income

� amount 2


Expenditure

� amount 17




9. NET ASSET VALUE

Net asset value of each unit of Rs. 10 of the Scheme Rs. 8.78






CLASSIFICATION





to to investment


EQUITY SHARES

Diversified 16,165 4,118 31.66 32.79



Larsen & Toubro Limited 1,037 229 1.76 1.83

Grasim Industries Limited 382 96 0.74 0.76

Dabur India Limited 1,190 73 0.56 0.58


M a r c h 3 1, 2 0 0 1




Infosys Technologies Limited 276 1,127 8.66 8.97

Satyam Computer Services Limited 1,173 275 2.12 2.18

NIIT Limited 161 116 0.89 0.93

Digital Equipment (India) Limited 137 57 0.44 0.46


State Bank of India 2,196 442 3.39 3.52

ICICI Limited 3,276 288 2.22 2.30

Housing Development Finance Corporation Limited 497 272 2.09 2.16

HDFC Bank Limited 1,015 232 1.78 1.85

Oriental Bank of Commerce 803 32 0.25 0.25

Refineries 20,428 1,153 8.87 9.19

Reliance Petroleum Limited 18,437 899 6.91 7.16

Hindustan Petroleum Corporation Limited 1,416 227 1.75 1.81

Kochi Refineries Limited 575 27 0.21 0.22

Cigarettes 1,024 834 6.41 6.64

ITC Limited 1,024 834 6.41 6.64

Pharmaceuticals 1,225 806 6.20 6.42

Ranbaxy Laboratories Limited 483 278 2.13 2.21

Cipla Limited 250 250 1.92 1.99

Dr. Reddy�s Laboratories Limited 110 137 1.05 1.09

Glaxo India Limited 249 106 0.82 0.84

Novartis India Limited 133 36 0.28 0.29

Food and Dairy Products 707 355 2.73 2.83

Nestle India Limited 402 204 1.58 1.63

Britannia Industries Limited 116 81 0.62 0.65

Smithkline Beecham Consumer Healthcare Limited 189 70 0.53 0.55

Telecommunications - Service Provider 2,628 348 2.68 2.77

Mahanagar Telephone Nigam Limited 2,628 348 2.68 2.77

Aluminium 311 240 1.84 1.91

Hindalco Industries Limited 311 240 1.84 1.91

Entertainment / Electronic Media Software 1,721 208 1.60 1.66

Zee Telefilms Limited 1,721 208 1.60 1.66

Power Generation and Supply 1,424 192 1.48 1.53

BSES Limited 575 107 0.83 0.86

Tata Power Co. Limited 849 85 0.65 0.67

Cement 1,328 187 1.44 1.49

Gujarat Ambuja Cements Limited 614 94 0.73 0.75

Associated Cement Companies Limited 714 93 0.71 0.74

Steel 1,536 188 1.44 1.50

Tata Iron and Steel Company Limited 1,536 188 1.44 1.50

Personal Care 794 166 1.28 1.32

Colgate-Palmolive (India) Limited 567 88 0.68 0.70

Procter & Gamble Hygiene and Health Care Limited 90 50 0.38 0.40

Reckitt Benckiser (India) Limited 137 28 0.22 0.22

Electric Equipment - General 1,021 146 1.12 1.16

Bharat Heavy Electricals Limited 1,021 146 1.12 1.16


to to investment



M a r c h 3 1, 2 0 0 1



Lubricants - Blending 515 119 0.92 0.95

Castrol (India) Limited 515 119 0.92 0.95

Automobiles - Motorcycles / Mopeds 833 118 0.90 0.94

Hero Honda Motors Limited 833 118 0.90 0.94

Automobiles - Scooters and 3-Wheelers 422 109 0.84 0.87

Bajaj Auto Limited 422 109 0.84 0.87

Automobiles - LCVs / HCVs 1,068 70 0.54 0.56

Tata Engineering & Locomotive Company Limited 1,068 70 0.54 0.56

Paints / Varnishes 268 66 0.50 0.52

Asian Paints (India) Limited 268 66 0.50 0.52

Petrochemicals - Polymers 1,044 57 0.44 0.45

Indian Petrochemicals Corporation Limited 1,044 57 0.44 0.45

Automobiles - Tractors 461 55 0.42 0.44

Mahindra & Mahindra Limited 461 55 0.42 0.44

Tea 235 55 0.42 0.44

Tata Tea Limited 235 55 0.42 0.44

Hotels 188 47 0.36 0.38

Indian Hotels Company Limited 188 47 0.36 0.38

Electric Equipment 173 41 0.32 0.33

Asea Brown Boveri Limited 173 41 0.32 0.33

Soda Ash 754 29 0.22 0.23

Tata Chemicals Limited 754 29 0.22 0.23

Computers - Hardware 133 11 0.08 0.09

HCL Infosystems Limited 133 11 0.08 0.09

Total 12,559 96.55 100.00

OTHER CURRENT ASSETS 590 4.54


LESS: CURRENT LIABILITIES 142 1.09

NET ASSETS 13,007 100.00


to to investment



M a r c h 3 1, 2 0 0 1




As at

31-Mar-01 @

Rs.




iii) Income from profit on sale of investment to third party, per unit 0.00






Add : Equalisation Credit & Unit Premium Reserve (0.15)




f) Net Asset Value per unit 8.78


i) Highest 10.35

ii) Lowest 8.61


i) Highest 10.35

ii) Lowest 8.61

i) Ratio of expenses (excluding realised and unrealised losses) to average daily net assets (%) 1.51

Ratio of gross income (excluding realised and unrealised income) to average daily net assets (%) 0.18

j) P. E. Ratio N.A.



@ Since the Franklin India Index Tax Fund was launched on February 26, 2001 the corresponding previous year's figures

are not available.

FIBFFRANKLININDIA BALANCEDFUND

To the Trustee of

Templeton Mutual Fund - Franklin India Balanced Fund :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - FRANKLIN INDIA BALANCED FUND as at March 31,

2001 and the related revenue account for the period from June 26, 2000 (the date of launch) to March 31, 2001. Our audit

was performed in accordance with generally accepted auditing standards and, accordingly, included such tests of the

accounting records and such other procedures as we considered necessary in the circumstances. 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.


TEMPLETON MUTUAL FUND - FRANKLIN INDIA BALANCED FUND as at March 31, 2001 and of its deficit for the period from

June 26, 2000 to March 31, 2001.








Auditors' Report


M a r c h 3 1, 2 0 0 1


B a l a n c e d F u n d


M a r c h 3 1, 2 0 0 1




Note

SOURCES OF FUNDS

Unit capital 2(b) & 3 135,196

Reserves and surplus 4 1,152

Current liabilities and provisions 5 3,714

140,062


Investments 2(c), 6 & 13 105,653

Deposits with scheduled banks 1,900

Other current assets 7 8,071

Net deficit 4 24,438

140,062









M a r c h 3 1, 2 0 0 1



Revenue Account for the period from June 26, 2000 (the date of launch)to March 31, 2001


Note

INCOME

Dividend 2(d) 125

Interest 2(d) & 8 5,788

5,913

EXPENSES AND LOSSES

Provision for net unrealised loss in value of investments 2(c) & 6(ii) 19,046

Loss on sale of investments, net 2(d) 8,627

Loss on inter-scheme transfer/sale of investments, net 2(d) 445

Management fee 9 1,187

Trusteeship fee 9 10

Custodian service charges 145

Registrar service charges 48

Commission to distributors 322

Audit fee 100


30,242

Deficit for the period 24,329

Equalisation debit 2(e) 109

Net deficit, transferred to balance sheet 24,438








M a r c h 3 1, 2 0 0 1




1. BACKGROUND

Templeton Mutual Fund - Franklin India Balanced Fund ('the Scheme') was launched on June 26, 2000 as an open ended,

balanced mutual fund scheme.






schemes.

The primary objective of the Scheme is to generate long term capital appreciation and current income by creating a portfolio

that is invested both in equity related securities and in fixed income and money market securities.

The Scheme offers its investors two plans: the Dividend Plan and the Growth Plan. The Scheme aims to generate a regular

flow of income for investors under the Dividend Plan, and to achieve capital appreciation for long term investors under the

Growth Plan.





(a) Determination of net asset value

l The net asset value of the units of the Scheme is determined separately for units issued under the Dividend and

Growth Plans ('the Plans').

l For reporting the two net asset values, the funds received under each Plan and their deployment are separately

accounted for. Further, income arising from such deployment, including unrealised gain or loss in the value of

investments, are separately determined and accounted for each of the Plans. Expenses incurred by the Scheme

are allocated to the Plans in proportion to their average daily net assets.

(b) Unit capital





fund schemes.

(c) Investments







l Investments in equity shares and fixed income securities which have traded during a period of thirty days prior to

the balance sheet date are stated at the closing prices on the balance sheet date or the last trading day before the

balance sheet date, as may be applicable, on the stock exchange where a majority (in terms of value) of these

securities are principally traded.

Notes to the Financial Statements for the period from June 26, 2000(the date of launch) to March 31, 2001


M a r c h 3 1, 2 0 0 1



l Other fixed income investments are stated at their fair value as determined by the AMC in accordance with the SEBI

Regulations and related circulars.



net unrealised gain or loss in the value of investments is determined separately for each category of investments.

Further, the change in 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.

(d) Revenue recognition


l Interest on investments in fixed income securities is recognised on an accrual basis.


l The discount or premium, if any, to the redemption value of fixed income securities is amortised and recognised as

interest income over the period to redemption. In respect of investments in 'deep discount bonds', the amortisation

is based on the yield to maturity at which such bonds were acquired. For other fixed income securities, a straight

line basis of amortisation is used.

(e) Equalisation account

l The purpose of equalisation account is to maintain per unit amount of a Plan's share of the Scheme's undistributed

income earned during the accounting period, so that continuing unitholders' share of undistributed income remains

unchanged on issue or redemption of units under that Plan.





l At period end, the balance in the equalisation account is transferred to the revenue account.

Quantity Amount

3. UNIT CAPITAL


Dividend Plan

Issued through initial offer 14,279,602.217 142,796

Issued other than through the initial offer 941,204.705 9,412

Units redeemed (5,777,335.080) (57,773)

Units outstanding, end of year 9,443,471.842 94,435

Growth Plan


Issued other than through the initial offer 358,647.061 3,586

Units redeemed (1,299,086.371) (12,991)


Total


Issued other than through the initial offer 1,299,851.766 12,998

Units redeemed (7,076,421.451) (70,764)



M a r c h 3 1, 2 0 0 1




Unit premium reserve

Net premium on issue/redemption of units

Dividend Plan 1,126

Growth Plan (58)

1,068


Dividend Plan 52

Growth Plan 32

84

Total reserves 1,152

Net deficit

Dividend Plan 17,878

Growth Plan 6,560

24,438


Contracts for purchase of investments 258

Sundry creditors for units redeemed by investors 1,885

Other current liabilities 1,571

3,714

6. INVESTMENTS

Equity shares 61,245

Privately placed debentures and bonds 636

Other debentures and bonds 43,772

105,653


(ii) Aggregate appreciation and depreciation in the value of investments are as follows:

Equity shares

� Appreciation 2,785


Other debentures and bonds

� Appreciation 155

� Depreciation 71


cent of average daily net assets) and Rs. 124.95 million (86 per cent of average daily net assets) respectively.




M a r c h 3 1, 2 0 0 1






Industrial Development Bank of India 11,859


Housing Development Finance Corporation Limited 2,724

Hughes Software Limited 1,702


HCL Technologies Limited 295

34,854




HCL Technologies Limited 2,767

Industrial Development Bank of India 608

9,209

The investments in equity shares have been made on account of their value at the related prices and in debentures and

bonds on account of high credit quality for comparable yield for the investment, and are in accordance with the


(v) Debentures amounting to Rs. 0.64 million obtained through private placements are not listed on any stock exchange

and, accordingly, have not been traded during a period of thirty days prior to March 31, 2001. Further, other debentures

and bonds amounting to Rs. 43.78 million have not been traded during a period of thirty days prior to March 31, 2001.


Balances with banks in current accounts 3,119

Contracts for sale of investments 2,275

Outstanding and accrued income 1,264

Sundry debtors for units issued to investors 159

Other current assets 1,254

8,071

8. INTEREST

Call money lending 3,250

Debentures and bonds 2,538

5,788






assets.


M a r c h 3 1, 2 0 0 1




The gross total income and expenditure (excluding any unrealised gains and realised and unrealised losses) and these

amounts as a percentage of the Scheme's average daily net assets are provided below:

Income

� amount 5,913


Expenditure

� amount 2,124




11.NET ASSET VALUE

Net asset value of each unit of Rs. 10 of the Scheme

Dividend Plan 8.23

Growth Plan 8.38






CLASSIFICATION

Details of investment portfolio and industrywise classification of the Scheme's investments as at March 31, 2001 are

presented below. The industry and company exposures are stated as a percentage of the Scheme's net assets as at March

31, 2001, as well as the aggregate investments in each investment category.


to to investment


EQUITY SHARES






NIIT Limited 1,600 1,146 1.02 1.87

HCL Technologies Limited 800 295 0.26 0.48


Cipla Limited 4,400 4,395 3.93 7.18

Hoechst Marion Roussel Limited 7,300 3,322 2.97 5.42

Dr. Reddy�s Laboratories Limited 1,550 1,933 1.73 3.16





M a r c h 3 1, 2 0 0 1




SSI Limited 5,190 3,487 3.12 5.69

Aptech Limited 6,800 938 0.84 1.53




Diversified 18,190 3,897 3.48 6.36

Pidilite Industries Limited 10,800 2,136 1.91 3.49


Hindustan Lever Limited 2,630 575 0.51 0.94

Paints / Varnishes 14,000 3,447 3.08 5.63


Refineries 18,000 3,431 3.07 5.60

Bharat Petroleum Corporation Limited 18,000 3,431 3.07 5.60





Electric Equipment - General 14,000 1,988 1.78 3.25


Engines 32,065 1,860 1.66 3.04




Castings - Grey Iron 2,684 270 0.24 0.44

Electrosteel Casting Limited 2,684 270 0.24 0.44

Pesticides & Agrochemicals 2,086 137 0.12 0.22

Syngenta India Limited 2,086 137 0.12 0.22

Total 61,245 54.73 100.00

PRIVATELY PLACED DEBENTURES AND BONDS

Banks and Financial Institutions 64 636 0.57 100.00

Industrial Development Bank of India 64 636 0.57 **100.00

Total 636 0.57 100.00

OTHER DEBENTURES AND BONDS


ICICI Limited 1,134 11,943 10.67 **27.28


Industrial Development Bank of India 2,500 11,223 10.03 **25.64


to to investment



M a r c h 3 1, 2 0 0 1



Power Generation and Supply 110,000 11,017 9.84 25.17

Tata Electric Co. Limited 110,000 11,017 9.84 **25.17

Petrochemicals - Polymers 52.50 5,463 4.88 12.48

Indian Petrochemicals Corporation Limited 52.50 5,463 4.88 **12.48

Financial Services 40 4,126 3.69 9.43

Cyrus Investments Limited 40 4,126 3.69 **9.43

Total 43,772 39.12 100.00

DEPOSITS 1,900 1.70




NET ASSETS 111,910 100.00

** Untraded / thinly traded securities


to to investment



M a r c h 3 1, 2 0 0 1




As at

31-Mar-01 @

Rs.




iii) Income from profit on sale of investment to third party, per unit (0.64)






Add : Equalisation Credit & Unit Premium Reserve 0.07




Dividend Growth

Plan Plan

f) Net Asset Value per unit 8.23 8.38


i) Highest 10.31 10.31



i) Highest 10.31 10.31



to average daily net assets (%) 1 . 9 1


to average daily net assets (%) 5 . 3 1

j) P. E. Ratio N.A. N.A.



@ Since the Franklin India Balanced Fund was launched on June 26, 2000 the corresponding previous year's figures are

not available.

TIIFTEMPLETONINDIA INCOMEFUND

To the Trustee of

Templeton Mutual Fund - Templeton India Income Fund :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - TEMPLETON INDIA INCOME FUND as at March 31, 2001






TEMPLETON MUTUAL FUND - TEMPLETON INDIA INCOME FUND as at March 31, 2001 and of its surplus for the year then

ended.








Auditors' Report


M a r c h 3 1, 2 0 0 1


I n c o m e F u n d


M a r c h 3 1, 2 0 0 1


I n c o m e F u n d


Note 2001 2000

SOURCES OF FUNDS

Unit capital 2(b) & 3 10,860,202 6,063,222

Reserves and surplus 2(b) & 4 4,495,656 1,680,765

Current liabilities and provisions 5 65,125 125,872

15,420,983 7,869,859


Investments 2(c), 6 & 14 14,391,469 6,981,866

Deposits 7 192,600 381,100


15,420,983 7,869,859









M a r c h 3 1, 2 0 0 1


I n c o m e F u n d



Note 2001 2000

INCOME

Interest 2(d) & 9 1,261,940 551,148

Profit on sale/redemption of investments, net 2(d) 140,808 94,352

Profit on inter-scheme transfer/sale of investments, net 2(d) 4,972 230

Change in net unrealised gain in value of investments 2(c) & 6(ii) � 86,329

Other income 3,187 2,463

1,410,907 734,522

EXPENSES AND LOSSES


Trusteeship fee 10 1,132 461

Custodian service charges 7,759 4,684

Registrar service charges 5,392 2,382

Commission to distributors 54,243 28,215

Audit fee 625 500

Publicity expenses � �


195,122 88,548

Surplus for the year 1,215,785 645,974

Equalisation credit 2(e) 252,520 212,205

Transfer from unit premium reserve � 5,110

Income distributed on capital account

Dividend Plan (323,608) (217,441)

Income-tax on income distributed (63,608) (23,919)

Retained surplus, transferred to balance sheet 4 1,081,089 621,929








M a r c h 3 1, 2 0 0 1


I n c o m e F u n d


1. BACKGROUND

Templeton Mutual Fund - Templeton India Income Fund ('the Scheme') was launched on February 3, 1997 as an open endedmutual fund scheme.


The primary investment objective of the Scheme is to generate a steady stream of income through investment primarily infixed income securities. A secondary objective is to generate capital appreciation.

The Scheme offers its investors two plans: the Dividend Plan and the Growth Plan. The Scheme aims to distribute dividendfrom time to time to its investors under the Dividend Plan, and to achieve capital appreciation for its investors under theGrowth Plan.






l The net asset value of the units of the Scheme is determined separately for units issued under the Dividend and

Growth Plans ('the Plans').

l For reporting the two net asset values, the funds received under each Plan and their deployment are separately

accounted for. Further, income arising from such deployment, including unrealised gain or loss in the value of

investments, are separately determined and accounted for each of the Plans. Expenses incurred by the Scheme

are allocated to the Plans in proportion to their average daily net assets.

(b) Unit capital



unit premium reserve of each Plan, 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



after considering brokerage, commission, and fees payable or receivable, if any. Any front-end discount on privately

placed investments is reduced from the cost of such investments.





l Other Central Government securities and fixed income investments are stated at their fair value as determined by

the AMC in accordance with the SEBI Regulations and related circulars.

l Following the issue of the Guidance Note on Accounting for Investments in the Financial Statements of Mutual

Funds by the Institute of Chartered Accountants of India (pursuant to the Eleventh Schedule of the SEBI Regulations),

from the current year, net unrealised gain or loss in the value of investments is determined separately for each



M a r c h 3 1, 2 0 0 1


I n c o m e F u n d

category of investments. Further, the change in 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 the unrealised

appreciation reserve.

Up to March 31, 2000, the change in the net unrealised gain or loss in the value of investments between two

balance sheet dates was determined on a portfolio basis and recognised in the revenue account. Had the Scheme

not changed its basis of determining and disclosing the change in net unrealised gain and loss in the value of

investments, its surplus for the year ended March 31, 2001 would have been higher by Rs. 56.34 million, unrealised

appreciation reserve as at March 31, 2001 would have been lower by Rs. 146.18 million and retained surplus as

at that date would have been higher by that amount. Consequently, this change has not impacted the net assets

of the Scheme as at March 31, 2001.




l The discount or premium, if any, to the redemption value of fixed income securities is amortised and recognised as

interest income over the period to redemption. In respect of investments in 'deep discount bonds', the amortisation

is based on the yield to maturity at which such bonds were acquired. For other fixed income securities, a straight

line basis of amortisation is used.


l The purpose of equalisation account is to maintain per unit amount of a Plan's share of the Scheme's undistributed

income earned during the accounting period, so that continuing unitholders' share of undistributed income remains

unchanged on issue or redemption of units under that Plan.






Quantity Amount

2001 2000 2001 2000

3. UNIT CAPITAL


Dividend Plan

Units outstanding beginning of year 304,205,486.132 11,225,084.691 3,042,055 112,251

Units issued 715,242,362.801 429,066,646.751 7,152,424 4,290,666

Units redeemed (554,406,944.383) (136,086,245.310) (5,544,069) (1,360,862)

Units outstanding, end of year 465,040,904.550 304,205,486.132 4,650,409 3,042,055

Growth Plan

Units outstanding beginning of year 302,116,710.116 108,927,121.627 3,021,167 1,089,271

Units issued 909,995,602.385 325,989,833.715 9,099,956 3,259,898

Units redeemed (591,133,055.011) (132,800,245.226) (5,911,330) (1,328,002)


Total

Units outstanding, beginning of year 606,322,196.248 120,152,206.318 6,063,222 1,201,522

Units issued 1,625,237,965.186 755,056,480.466 16,252,380 7,550,565

Units redeemed (1,145,539,999.394) (268,886,490.536) (11,455,400) (2,688,865)

Units outstanding, end of year 1,086,020,162.040 606,322,196.248 10,860,202 6,063,222


M a r c h 3 1, 2 0 0 1


I n c o m e F u n d

2001 2000


Dividend Plan


Balance, beginning of year 90,133 2,868

Net premium on issue/redemption of units 67,587 92,375

Transfer to revenue account � (5,110)




Change in net unrealised appreciation in value of investments 18,389 �

Balance, end of year 47,348 �

Retained surplus

Balance, beginning of year 70,878 799


Surplus transferred from revenue account 72,155 70,079


319,142 161,011

Growth Plan



Net premium on issue/redemption of units 1,609,826 628,768

Balance, end of year 2,298,106 688,280





Retained surplus



Surplus transferred from revenue account 1,008,934 551,850

Balance, end of year 1,779,580 831,474

4,176,514 1,519,754

Total 4,495,656 1,680,765


Management fee 1,553 1,553

Trusteeship fee 9 8

Sundry creditors for units redeemed by investors 19,487 8,685

Unclaimed distributed income 28,977 92,346


65,125 125,872


M a r c h 3 1, 2 0 0 1


I n c o m e F u n d

6. INVESTMENTS

Central Government securities 4,100,631 3,608,276

Privately placed debentures and bonds 1,476,016 2,230,739

Other debentures and bonds 8,814,822 1,142,851

14,391,469 6,981,866

(i) The investments of the Scheme are registered in the name of the Fund for the benefit, of the Scheme's unitholders.


2001 2000

Central Government securities



Privately placed debentures


� Depreciation 516 6,783



� Depreciation 5,419 620

(iii) The aggregate value of investments acquired and sold/redeemed during the year were Rs. 58,724 million

(2000 � Rs. 18,000 million) [509 per cent (2000 � 384.17 per cent) of average daily net assets) and Rs. 51,523 million

(2000 � Rs 12,614 million) [447 per cent (2000 � 269.22 per cent) of average daily net assets] respectively.

(iv) Debentures amounting to Rs. 1,476 million (2000 � Rs. 2,230 million) obtained through private placements are not

listed on any stock exchange and, accordingly, have not been traded during a period of thirty days prior to March 31,

2001. Further, other debentures and bonds amounting to Rs. 7,765 million (2000 � Rs. 910.09 million) have also not

been traded during a period of thirty days prior to March 31, 2001.

(v) During the year ended March 31, 2001, the Scheme has invested in the debentures and bonds of certain companies,

which have invested in some of the schemes of the Fund during a period of one year before or after the date of the

Scheme's investment, in excess of five per cent of those schemes' net assets. The Scheme's investments in these

companies as at March 31, 2001 are as follows:

2001 2000

Industrial Development Bank of India 999,511 �

ICICI Limited 622,873 323,325

Gujarat Ambuja Cements Limited 355,530 101,480



2,483,069 578,288

2001 2000


M a r c h 3 1, 2 0 0 1


I n c o m e F u n d



ICICI Limited 1,183,234





2,681,895

These investments have been made on account of the high credit quality for comparable yield for the investment and

are in accordance with the investment objectives of the Scheme.

2001 2000

7. DEPOSITS

Scheduled banks 172,600 381,100

Companies/ institutions 20,000 �

192,600 381,100




Outstanding and accrued income 421,887 290,182

Other current assets 143,517 �

836,914 506,893

9. INTEREST

Debentures and bonds 800,020 307,525

Central Government securities 381,993 223,125

Call money lending 59,974 16,006

Certificates of deposit 10,769 3,135

Commercial paper 9,184 57

Deposits with banks � 1,300

1,261,940 551,148

10.MANAGEMENT AND TRUSTEESHIP FEE


of such fee at an annual rate of 1.25 per cent of the Scheme's average daily net assets up to Rs 1 billion and at an annual

rate of 1 per cent of the average daily net assets in excess of that amount.


assets.


M a r c h 3 1, 2 0 0 1


I n c o m e F u n d


The total income (excluding net unrealised gain in value of investments) and expenditure and these amounts as a percentage


2001 2000

Income

� amount 1,410,907 648,193


Expenditure

� amount 195,122 88,548


12.NET ASSET VALUE


Dividend Plan Rs. 10.69 Rs. 10.53

Growth Plan Rs. 16.73 Rs. 15.03

The net asset value of the Scheme's unit is determined separately for units issued under the Dividend and Growth Plans after

including the respective unit capital and reserves and surplus.


Prior year amounts have been reclassified, wherever necessary, to conform to current year's presentation.


CLASSIFICATION

Details of investment portfolio and industrywise classification of the Scheme's investments in each category of investments

as at March 31, 2001 are presented below. The industry and company exposures are stated as a percentage of the

Scheme's net assets as at March 31, 2001, as well as the aggregate investments in each investment category.


to to investment


CENTRAL GOVERNMENT SECURITIES 4,100,631 26.70


Financial Services 15,000,000 967,664 6.30 65.56

Kotak Mahindra Primus Limited 2,250,000 227,480 1.48 **15.41

Tata Finance Limited 15,000,000 150,000 0.98 **10.16

Infrastructure Leasing & Financial Services Limited 1,000,000 100,465 0.66 **6.81

GE Countrywide 1,000,000 100,240 0.65 **6.79

GE Capital Services India Limited 1,000,000 100,210 0.65 **6.79

PFSL Pass Thru Certificates 10 87,103 0.57 **5.90

Orix Auto Finance (India) Limited 600,000 61,188 0.40 **4.15

Citicorp Finance (India) Limited 600,000 60,771 0.40 **4.12

Rabo-India Finance Private Limited 500,000 50,000 0.33 **3.39

Citifinancial Retail Services 300,000 30,207 0.20 **2.05


M a r c h 3 1, 2 0 0 1


I n c o m e F u n d

Paper 1,300,000 105,365 0.69 7.14

ITC Bhadrachalam Paper Boards Limited 1,300,000 105,365 0.69 **7.14

Cement 1,000,000 101,380 0.66 6.87

Gujarat Ambuja Cements Limited 1,000,000 101,380 0.66 **6.87

Entertainment 200 100,842 0.66 6.83

PAN India Paryatan Limited 200 100,842 0.66 **6.83

Banks and Financial Institutions 1,000,000 99,920 0.65 6.77

Housing Development Finance Corporation Limited 1,000,000 99,920 0.65 **6.77

Automobilies - Tractors 500,000 50,460 0.33 3.42

Eicher Limited 500,000 50,460 0.33 **3.42

Auto Ancillaries 500,000 50,385 0.33 3.41

India Pistons Limited 500,000 50,385 0.33 **3.41

Total 1,476,016 9.61 100.00


Banks and Financial Institutions 24,906,325 2,901,991 18.90 32.92

Industrial Development Bank of India 9,502,805 999,959 6.52 **11.34

ICICI Limited 5,903,311 630,655 4.11 **7.15

State Bank of India 3,500,000 357,245 2.33 4.05

Export Import Bank of India 2,000,000 201,840 1.31 **2.29



Standard Chartered Grindlays Bank 1,500,000 151,765 0.99 **1.72

Citibank NA 1,000,000 107,990 0.70 1.23

Citibank NA 9 90,620 0.59 **1.03

Small Industries Development Bank of India 200 1,807 0.01 **0.02

Financial Services 14,016,500 1,532,140 9.99 17.39

Power Finance Corporation Limited 4,500,000 462,465 3.02 **5.26

GE Capital Services India Limited 3,800,000 380,780 2.48 **4.32

Reliance Capital Limited 2,700,000 228,526 1.49 **2.59

Citicorp Finance (India) Limited 301,500 182,325 1.19 **2.07

Sundaram Finance Limited 1,500,000 150,780 0.98 **1.71

Indian Railway Finance Corporation 500,000 54,550 0.36 **0.62

Kotak Mahindra Finance Limited 500,000 50,535 0.33 **0.57

Cyrus Investments Limited 215,000 22,179 0.14 **0.25

Power Generation and Supply 88,900,000 890,334 5.80 10.10

Tata Electric Company Limited 88,900,000 890,334 5.80 **10.10

Refineries 7,200,000 726,056 4.73 8.23

Reliance Petroleum Limited 4,000,000 400,400 2.61 **4.54

Hindustan Petroleum Corporation Limited 2,000,000 201,300 1.31 **2.28

Bharat Petroleum Corporation Limited 1,200,000 124,356 0.81 1.41

Diversified 6,600,000 675,273 4.39 7.66

Reliance Industries Limited 6,100,000 622,413 4.05 **7.06

Grasim Industries Limited 500,000 52,860 0.34 **0.60

Aluminium 3,616,430 372,989 2.43 4.23

Hindalco Industries Limited 3,000,000 305,250 1.99 **3.46

National Aluminium Company Limited 616,430 67,739 0.44 **0.77


to to investment



M a r c h 3 1, 2 0 0 1


I n c o m e F u n d

Cement 3,500,000 355,975 2.32 4.04

Gujarat Ambuja Cements Limited 2,500,000 254,150 1.66 2.88

Madras Cements Limited 1,000,000 101,825 0.66 **1.16

Hotels 2,500,000 255,425 1.66 2.90

Indian Hotels Company Limited 2,500,000 255,425 1.66 **2.90

Automobiles - LCVs / HCVs 2,500,000 251,925 1.64 2.86

Tata Engineering & Locomotive Company Limited 2,500,000 251,925 1.64 **2.86

Food and Dairy Products 2,500,000 251,125 1.64 2.85

Britannia Industries Limited 2,500,000 251,125 1.64 **2.85

Automobiles - Tractors 1,500,000 152,520 0.99 1.73

Mahindra and Mahindra Limited 1,500,000 152,520 0.99 **1.73

Power 30 146,351 0.95 1.66

India Infrastructure Developers Limited 30 146,351 0.95 **1.66

Steel 1,000 104,816 0.68 1.19

Tata Iron and Steel Company. Limited 1,000 104,816 0.68 **1.19

Infrastructure 12,382 80,474 0.52 0.91

Noida Toll Bridge Company Limited 12,382 80,474 0.52 **0.91

Petrochemicals - Polymers 707,500 76,776 0.50 0.87

Indian Petrochemicals Corporation Limited 707,500 76,776 0.50 **0.87

Automobiles - Passenger Cars 400,000 40,652 0.26 0.46

Ford India Limited 400,000 40,652 0.26 **0.46

Total 8,814,822 57.40 100.00

DEPOSITS 192,600 1.25


TOTAL ASSETS 15,420,983 100.42


NET ASSETS 15,355,858 100.00



to to investment



M a r c h 3 1, 2 0 0 1


I n c o m e F u n d


As at As at As at

31-Mar-01 31-Mar-00 31-Mar-99

Rs. Rs. Rs.


i) Income other than profit

on sale of investment, per unit 1.16 0.92 1.36

ii) Income from profit on

Inter Scheme sales/transfer


iii) Income from profit on sale of

investment to third party, per unit 0.13 0.16 0.07

iv) Transfer to revenue account from

past year�s reserve, per unit 0.00 0.00 0.00

b) Less: Aggregate of expenses, write off,

amortisation and charges, per unit (0.18) (0.15) (0.22)

c) Less : Unrealised depreciation in value of

investments, per unit 0.00 0.00 0.00

d) Add : Unrealised appreciation in value of


e) Net Income per unit 1.17 1.07 1.23

Add : Equalisation Credit &

Unit Premium Reserve 2.49 1.63 1.74

Reserve of the previous year 0.83 0.46 0.00

Less : Dividend Distribution and Dividend Tax (0.36) (0.39) 0.00

Growth per Unit 4.14 2.77 2.97

As at 31-Mar-01 As at 31-Mar-00 As at 31-Mar-99

Growth Dividend Growth Dividend Growth Dividend

Plan Plan Plan Plan Plan Plan

f) Net Asset Value per unit 16.73 10.69 15.03 10.53 13.11 11.63


i) Highest 16.75 10.96 15.03 10.84 13.11 11.63

ii) Lowest 15.14 10.31 13.12 10.29 11.45 10.15


i) Highest 16.75 10.96 15.03 10.84 13.11 11.63

ii) Lowest 15.14 10.31 13.12 10.29 11.57 10.25

i) Ratio of expenses (excluding realised and

unrealised losses) to average daily

net assets (%) 1.69 1.89 1.93

Ratio of gross income (excluding realised

and unrealised income) to average

daily net assets (%) 12.23 13.83 14.36

j) P. E. Ratio N.A. N.A. N.A. N.A. N.A. N.A.



TMIPTEMPLETONMONTHLYINCOME PLAN


M a r c h 3 1, 2 0 0 1

T e m p l e t o n

M o n t h l y I n c o m e P l a n

To the Trustee of

Templeton Mutual Fund - Templeton Monthly Income Plan :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - TEMPLETON MONTHLY INCOME PLAN as at March 31,

2001 and the related revenue account for the year then ended. Our audit was performed in accordance with generally

accepted auditing standards and, accordingly, included such tests of the accounting records and such other procedures as

we considered necessary in the circumstances. 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.


TEMPLETON MUTUAL FUND - TEMPLETON MONTHLY INCOME PLAN as at March 31, 2001 and of its surplus for the year then

ended.








Auditors' Report


M a r c h 3 1, 2 0 0 1

T e m p l e t o n



Note 2001 2000

SOURCES OF FUNDS

Unit capital 2(b) & 3 1,503,965 1,743,421

Reserves and surplus 2(b) & 4 47,101 11,768

Current liabilities and provisions 5 26,281 74,524

1,577,347 1,829,713


Investments 2(c), 6 & 14 1,469,671 1,499,554

Deposits with companies/ institutions 21,900 220,200


1,577,347 1,829,713









M a r c h 3 1, 2 0 0 1

T e m p l e t o n




Note 2001 2000

INCOME

Dividend 2(d) 101 �

Interest 2(d) & 8 196,435 24,386

Profit on sale/redemption of investments, net 2(d) � 3,242

Profit on inter-scheme transfer/sale of investments, net 2(d) 1,086 185

Other income 195 32

197,817 27,845

EXPENSES AND LOSSES

Change in provision for net unrealised loss in value of investments 2(c) & 6(ii) 7,664 3,693

Loss on sale/redemption of investments, net 2(d) 7,760 �



Custodian service charges 2,195 226

Registrar service charges 402 232

Commission to distributors 9,400 �

Audit fee 150 65

Other operating expenses 2,165 805

50,201 7,426


Equalisation credit 2(e) 1,320 856

Income distribution on capital account 10 (101,780) (8,797)

Income-tax on distributed income (20,690) (968)

Retained surplus, end of year 4 26,466 11,510








M a r c h 3 1, 2 0 0 1

T e m p l e t o n



1. BACKGROUND

Templeton Mutual Fund - Templeton Monthly Income Plan ('the Scheme') was launched on January 24, 2000 as an openended mutual fund scheme.

Templeton Mutual Fund ('the Fund') was established as a trust under the Indian Trusts Act, 1882, by way of a trust deeddated January 4, 1996 and a supplementary trust deed dated March 30, 1996 executed by Templeton International Inc.,USA, the sponsor of the Fund. In accordance with the Securities and Exchange Board of India ('SEBI') (Mutual Funds)Regulations, 1996 ('the SEBI Regulations'), the Board of Directors of Templeton Trust Services Private Limited ('the Trustee')has appointed Templeton Asset Management (India) Private Limited ('the AMC') to manage the Fund's affairs and operate itsschemes.

The primary objective of the Scheme is to earn regular income for investors through investment primarily in highly rateddomestic fixed income securities.

The Scheme offers its investors four plans: the Monthly Dividend Plan, the Quarterly Dividend Plan, the Half Yearly DividendPlan and the Growth Plan ('the Plans'). The Scheme aims to distribute dividend from time to time to its investors under thethree dividend plans, and to achieve capital appreciation for its investors under the Growth Plan.


The financial statements are prepared on an accrual basis of accounting, under the historical cost convention, as modifiedfor investments, which are 'marked-to-market'. The significant accounting policies, which are in accordance with the SEBIRegulations and have been approved by the Boards of Directors of the AMC and the Trustee, are stated below.


l The net asset value of the units of the Scheme is determined separately for units issued under the Plans.

l For reporting the four net asset values, the funds received under each Plan and their deployment are separatelyaccounted for. Further, income arising from such deployment, including unrealised gain or loss in the value ofinvestments, are separately determined and accounted for each of the Plans. Expenses incurred by the Schemeare allocated to the Plans in proportion to their average daily net assets.

(b) Unit capital


l Upon issue and redemption of units, the net premium or discount to the face value of units is adjusted against theunit premium reserve of each Plan, after an appropriate portion of the issue proceeds and redemption payouts iscredited or debited respectively to the equalisation account, a mandatory requirement for open ended mutual fundschemes.

(c) Investments




l Investments in securities which have traded during a period of thirty days prior to the balance sheet date are statedat the closing prices on the balance sheet date or the last trading day before the balance sheet date, on the stockexchange where a majority (in terms of value) of these securities are principally traded.

l Other Central Government securities and fixed income investments are stated at their fair value as determined bythe AMC in accordance with the SEBI Regulations and related circulars.

l Following the issue of the Guidance Note on Accounting for Investments in the Financial Statements of MutualFunds by the Institute of Chartered Accountants of India (Pursuant to the Eleventh Schedule of the SEBI Regulations),from the current year, net unrealised gain or loss in the value of investments is determined separately for eachcategory of investments. Further, the change in net unrealised loss, if any, between two balance sheet dates isrecognised in the revenue account and the change in net unrealised gain, if any, is adjusted in the unrealisedappreciation reserve.

Notes to the Financial Statements for the period from January 24, 2000(date of launch) to March 31, 2001


M a r c h 3 1, 2 0 0 1

T e m p l e t o n


Up to March 31, 2000, the change in the net unrealised gain or loss in the value of investments between twobalance sheet dates was determined on a portfolio basis and recognised in the revenue account. Had the Schemenot changed its basis of determining and disclosing the change in net unrealised gain and loss in the value ofinvestments, its surplus for the year ended March 31, 2001 would have been higher by Rs. 9.16 million, unrealisedappreciation reserve as at March 31, 2001 would have been lower by Rs. 9.71 million and retained surplus as atthat date would have been higher by that amount. Consequently, this change has not impacted the net assets ofthe Scheme as at March 31, 2001.





l The discount or premium, if any, to the redemption value of fixed income securities is amortised and recognised asinterest income over the period to redemption. In respect of investments in 'deep discount bonds', the amortisationis based on the yield to maturity at which such bonds were acquired. For other fixed income securities, a straightline basis of amortisation is used.


l The purpose of equalisation account is to maintain per unit amount of a Plan's share of the Scheme's undistributedincome earned during the accounting period, so that continuing unitholders' share of undistributed income remainsunchanged on issue or redemption of units under that Plan.



Quantity Amount

2001 2000 2001 2000

3. UNIT CAPITAL


Outstanding, beginning of year:Monthly Dividend Plan 99,099,173.345 � 990,992 �Quarterly Dividend Plan 31,599,011.115 � 315,990 �Half Yearly Dividend Plan 12,254,345.968 � 122,544 �Growth Plan 31,389,536.035 � 313,895 �

174,342,066.463 � 1,743,421 �

Units issued during the year:Monthly Dividend Plan 63,296,916.801 113,305,095.283 632,969 1,133,051Quarterly Dividend Plan 24,228,574.022 37,377,242.211 242,286 373,772Half Yearly Dividend Plan 3,393,098.042 12,481,773.898 33,931 124,818Growth Plan 21,867,879.611 40,092,399.146 218,679 400,924

112,786,468.476 203,256,510.538 1,127,865 2,032,565

Redeemed during the year:Monthly Dividend Plan 96,287,599.039 14,205,921.938 962,876 142,059Quarterly Dividend Plan 16,469,530.422 5,778,231.096 164,696 57,782Half Yearly Dividend Plan 2,413,173.016 227,427.930 24,132 2,274Growth Plan 21,561,686.613 8,702,863.111 215,617 87,029

136,731,989.090 28,914,444.075 1,367,321 289,144

Outstanding, end of year:Monthly Dividend Plan 66,108,491.107 99,099,173.345 661,085 990,992Quarterly Dividend Plan 39,358,054.715 31,599,011.115 393,580 315,990Half Yearly Dividend Plan 13,234,270.994 12,254,345.968 132,343 122,544Growth Plan 31,695,729.033 31,389,536.035 316,957 313,895

150,396,545.849 174,342,066.463 1,503,965 1,743,421


M a r c h 3 1, 2 0 0 1

T e m p l e t o n


2001 2000


Monthly Dividend Plan



Net premium on issue/redemption of units (1,481) 88

Balance, end of year (1,393) 88


Transfer from retained surplus 308 �



Retained surplus

Balance, beginning of year 4,134 �

Transfer to unrealised appreciation reserve (308) �



11,608 4,222

Quarterly Dividend PlanUnit premium reserve


Net premium on issue/redemption of units 847 204

Balance, end of year 1,051 204




Retained surplusBalance, beginning of year 2,982 �Surplus transferred from revenue account 1,918 2,982


8,289 3,186

Half Yearly Dividend PlanUnit premium reserve


Net premium on issue/redemption of units 124 32

Balance, end of year 156 32

Unrealised appreciation reserveTransfer from retained surplus 74 �

Change in net unrealised appreciation in value of investments 341 �

Balance, end of year 415 �

Retained surplusBalance, beginning of year 1,078 �Transfer to unrealised appreciation reserve (74) �

Transfer to revenue account (1,146) 1,078

Balance, end of year (142) 1,078

429 1,110


M a r c h 3 1, 2 0 0 1

T e m p l e t o n


Growth PlanUnit premium reserve

Balance, beginning of year (66) �

Net premium on issue/redemption of units 214 (66)

Balance, end of year 148 (66)

Unrealised appreciation reserveTransfer from retained surplus 169 �

Change in net unrealised appreciation in value of investments 640 �

Balance, end of year 809 �

Retained surplusBalance, beginning of year 3,316 �Transfer to unrealised appreciation reserve (169) �



26,775 3,250

Total 47,101 11,768

5. CURRENT LIABILITIES AND PROVISIONS

Management fee � 405





26,281 74,524

6. INVESTMENTS

Equity shares 30,042 4,687

Privately placed debentures 274,161 911,895

Other debenture and bonds 940,355 207,618


1,469,671 1,499,554



2001 2000

Equity shares

� Appreciation 961 �


Privately placed debentures



2001 2000


M a r c h 3 1, 2 0 0 1

T e m p l e t o n



� Appreciation 8,641 �

� Depreciation 2,274 �

Central Government securities

� Appreciation 1,163 169


(iii) The aggregate value of investments acquired and sold/redeemed during the year were Rs. 6,073 million

(2000 � Rs. 3,661 million) [334 per cent (2000 � 212.18 per cent) of average daily net assets] and Rs 6,098 million

(2000 � Rs. 2,157 million) [335 per cent (2000 � 125.03 per cent) of average daily net assets] respectively.

(iv) Debentures amounting to Rs. 274 million (2000 � Rs. 911.90 million) obtained through private placements are not

listed on any stock exchange and, accordingly, have not been traded during a period of thirty days prior to March 31,

2001. Further, other debentures and bonds amounting to Rs. 787 million (2000 � Rs 207.62 million) have not been

traded during a period of thirty days prior to March 31, 2001.

(v) During the year ended March 31, 2001, 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 during a period of one year before or after the date

of the Scheme's investment, in excess of five per cent of those schemes' net assets. The Scheme's investments in these


2001 2000


Gujarat Ambuja Cements Limited 111,841 101,480

Housing Development Finance Corporation Limited 105,244 �



Hughes Software Systems Limited 910 �

Gujarat Gas Company Limited � 106,050

427,257 309,098








744,772

The investments in equity shares have been made on account of their value at the related prices and in debentures and

bonds on account of high credit quality for comparable yield for the investment, and are in accordance with the






Contracts for sale of investments � 8,257

Other current assets 10,589 35,336

85,776 109,959

2001 2000


M a r c h 3 1, 2 0 0 1

T e m p l e t o n


8. INTEREST




196,435 24,386



of such fee at an annual rate of 1.25 per cent of the Scheme's average daily net assets up to Rs. 1 billion and at an annual

rate of 1 per cent of the average daily net assets in excess of that amount. Fees for trusteeship services are payable to the

Trustee at an annual rate of 0.01 per cent of the Scheme's average daily net assets.

10. INCOME DISTRIBUTION ON CAPITAL ACCOUNT

2001 2000

Monthly Dividend Plan 63,304 8,797

Quarterly Dividend Plan 30,837 �

Half Yearly Dividend Plan 7,639 �

101,780 8,797


The total income and expenditure and these amounts as a percentage of the Scheme's average daily net assets are provided

below:

2001 2000

Income

� amount 197,817 27,845


Expenditure

� amount 34,777 3,733


For the period ended March 31, 2000, on an annualised basis, the total income and expenditure are 8.56 per cent and 1.18

per cent respectively of the Scheme's average daily net assets.

12.NET ASSET VALUE


2001 2000

Monthly Dividend Plan Rs. 10.18 Rs. 10.04

Quarterly Dividend Plan Rs. 10.21 Rs. 10.10

Half Yearly Dividend Plan Rs. 10.03 Rs. 10.09


The net asset value of the Scheme's unit is determined separately for units issued under the four Plans after including the

respective unit capital and reserves and surplus.

2001 2000


M a r c h 3 1, 2 0 0 1

T e m p l e t o n




amounts relating to the revenue account are for a period of approximately two months and are therefore not directly



CLASSIFICATION

Details of investment portfolio and industrywise classification of the Scheme's investments in each category of investments

as at March 31, 2001 are presented below. The industry and company exposures are stated as a percentage of the

Scheme's net assets as at March 31, 2001, as well as the aggregate investments in each category of investments.


to to investment


EQUITY SHARES








Hughes Software Systems Limited 1,400 909 0.06 3.03

Diversified 23,500 5,217 0.34 17.36


Grasim Industries Limited 2,500 623 0.04 2.07


Cipla Limited 2,617 2,614 0.17 8.70

Hoechst Marion Roussel Limited 2,006 913 0.06 3.04




SSI Limited 2,500 1,680 0.11 5.59

Telecommunications - Service Provider 3,000 397 0.03 1.32

Mahanagar Telephone Nigam Limited 3,000 397 0.03 1.32

Total 30,042 1.94 100.00


Automobiles - Passenger Cars 1,100,000 111,793 7.21 40.78

Ford India Limited 1,100,000 111,793 7.21 **40.78

Cement 1,000,000 101,380 6.54 36.98

Gujarat Ambuja Cements Limited 1,000,000 101,380 6.54 **36.98

Financial Services 600,000 60,988 3.93 22.24

Orix Auto Finance (India) Limited 400,000 40,792 2.63 **14.87

Ford Credit Kotak Mahindra Limited 200,000 20,196 1.30 **7.37

Total 274,161 17.68 100.00


M a r c h 3 1, 2 0 0 1

T e m p l e t o n



Banks and Financial Institutions 3,921,459 476,064 30.69 50.63

Industrial Development Bank of India 1,000,035 147,595 9.52 **15.70



ICICI Limited 620,000 59,391 3.83 **6.32

Export Import Bank of India 500,000 50,460 3.25 5.37

Small Industries Development Bank of India 1,424 13,098 0.84 **1.39

Cement 600,000 52,525 3.38 5.58

Madras Cements Limited 500,000 42,065 2.71 **4.47

Gujarat Ambuja Cements Limited 100,000 10,460 0.67 **1.11

Diversified 1,000,000 104,380 6.73 11.10

Gujarat Gas Company Limited 1,000,000 104,380 6.73 **11.10

Financial Services 1,150,000 121,286 7.82 12.89

Kotak Mahindra Finance Limited 500,000 50,535 3.26 **5.37

SBI Capital Markets Limited 500,000 50,410 3.25 **5.36

Cyrus Investments Limited 145,000 14,958 0.96 **1.59

Infrastructure Leasing & Financial Services Limited 5,000 5,383 0.35 **0.57

Hotels 1,000,000 102,170 6.59 10.87

Indian Hotels Company Limited 1,000,000 102,170 6.59 **10.87

Tea 500,000 33,475 2.16 3.56

Tata Coffee Limited 500,000 33,475 2.16 **3.56


Mahanagar Telephone Nigam Limited 500,000 50,455 3.25 **5.37

Total 940,355 60.62 100.00

CENTRAL GOVERNMENT SECURITIES 225,113 14.51

DEPOSITS 21,900 1.41


TOTAL ASSETS 1,577,347 101.69


NET ASSETS 1,551,066 100.00



to to investment



M a r c h 3 1, 2 0 0 1

T e m p l e t o n



As at As at

31-Mar-01 31-Mar-00

Rs. Rs.



ii) Income from profit on Inter Scheme sales/transfer of investment, per unit 0.01 0.00

iii) Income from profit on sale of investment to third party, per unit (0.05) 0.02


b) Less : Aggregate of expenses, write off, amortisation and

charges, per unit (0.23) (0.02)

c) Less : Unrealised depreciation in value of investments, per unit (0.05) (0.02)


e) Net Income per unit 1.05 0.12

Add : Equalisation Credit & Unit Premium Reserve 0.01 0.01

Reserve of the previous year 0.08 0.00

Less : Dividend Distribution and Dividend Tax (0.81) (0.06)

Growth per Unit 0.33 0.07

As at 31-Mar-01 As at 31-Mar-00

Monthly Quarterly Half Yearly Growth Monthly Quarterly Half Yearly Growth

Dividend Dividend Dividend Plan Dividend Dividend Dividend Plan

Plan Plan Plan Plan Plan Plan

f) Net Asset Value per unit 10.18 10.21 10.03 10.84 10.04 10.10 10.09 10.10


i) Highest 10.28 10.47 10.47 10.96 10.12 10.10 10.09 10.11

ii) Lowest 10.00 9.97 10.02 10.12 10.00 10.00 10.00 10.00


i) Highest 10.28 10.47 10.47 10.96 10.12 10.10 10.09 10.11

ii) Lowest 10.00 9.97 10.02 10.12 10.00 10.00 10.00 10.00

i) Ratio of expenses (excluding

realised and unrealised losses)


Ratio of gross income (excluding

realised and unrealised income)


j) P. E. Ratio N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.

* The highest and lowest sale price of the units of the scheme has been determined after adding to the highest and lowest NAV, the

maximum sales load applicable.

TGSFTEMPLETON INDIAGOVERNMENTSECURITIES FUND

To the Trustee of

Templeton Mutual Fund - Templeton India Government Securities Fund :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - TEMPLETON INDIA GOVERNMENT SECURITIES FUND as

at March 31, 2001 and the related revenue account for the year then ended. Our audit was performed in accordance with

generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other

procedures as we considered necessary in the circumstances. 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.


TEMPLETON MUTUAL FUND - TEMPLETON INDIA GOVERNMENT SECURITIES FUND as at March 31, 2001 and of its surplus

for the year then ended.








Auditors' Report


M a r c h 3 1, 2 0 0 1


G o v e r n m e n t S e c u r i t i e s F u n d


M a r c h 3 1, 2 0 0 1




Note 2001 2000

SOURCES OF FUNDS

Unit capital 2(b) & 3 2,080,416 2,935,056



2,495,077 3,107,756


Investments in Central Government securities 2(c) & 6 2,346,472 2,893,904



2,495,077 3,107,756









M a r c h 3 1, 2 0 0 1





Note 2001 2000

INCOME

Interest 2(d) & 8 292,557 147,727

Profit on sale/redemption of investments, net 2(d) 85,380 60,180

Profit on inter-scheme transfer/sale of investments, net 2(d) 12,726 4,263

Net unrealised gain in value of investments 2(c) & 6(ii) � 20,272

Other income 3,475 84

394,138 232,526

EXPENSES AND LOSSES



Commission to distributors 11,992 3,993

Registrar service fees 254 �

Audit fee 410 375


Other operating expenses 730 1,721

34,282 16,280


Equalisation credit 2(e) 13,959 60,840

Income distribution on capital account

Dividend Plan (148,898) (147,398)

Income-tax on income distributed (27,323) (16,214)

Retained surplus, transferred to balance sheet 4 197,594 113,474








M a r c h 3 1, 2 0 0 1




1. BACKGROUND

Templeton Mutual Fund - Templeton India Government Securities Fund ('the Scheme') was launched on June 21, 1999, asan open ended dedicated gilts mutual fund scheme.


The primary objective of the Scheme is to generate a credit risk-free return through investment in sovereign securities issuedby the Central Government and/or a State Government and/or any security unconditionally guaranteed by the CentralGovernment and/or a State Government for repayment of principal and interest.

The Scheme offers its investors two plans: the Dividend Plan and the Growth Plan. The Scheme aims to distribute dividendfrom time to time to its investors under the Dividend Plan, and to achieve capital appreciation for its investors under theGrowth Plan.




l The net asset value of the units of the Scheme is determined separately for units issued under the Dividend andGrowth Plans ('the Plans').

l For reporting the two net asset values, the funds received under each Plan and their deployment are separatelyaccounted for. Further, income arising from such deployment, including unrealised gain or loss in the value ofinvestments, are separately determined and accounted for each of the Plans. Expenses incurred by the Schemeare allocated to the Plans in proportion to their average daily net assets.

(b) Unit capital


l Upon issue and redemption of units, the net premium or discount to the face value of units is adjusted against theunit premium reserve of each Plan, after an appropriate portion of the issue proceeds and redemption payouts iscredited or debited respectively to the equalisation account, a mandatory requirement for open ended mutual fundschemes.

(c) Investments




l Investments in Central Government securities which have traded during a period of thirty days prior to the balancesheet date are stated at the closing prices on the balance sheet date or the last trading day before the balancesheet date, as may be applicable, on the stock exchange where a majority (in terms of value) of these securities areprincipally traded.

l Other Central Government securities are stated at their fair value as determined by the AMC in accordance with theSEBI Regulations.



M a r c h 3 1, 2 0 0 1



l Following the issue of the Guidance Note on Accounting for Investments in the Financial Statements of MutualFunds by the Institute of Chartered Accountants of India (pursuant to the Eleventh Schedule of the SEBI Regulations),from the current year, net unrealised gain or loss in the value of investments is determined separately for eachcategory of investments. Further, the change in net unrealised loss, if any, between two balance sheet dates isrecognised in the revenue account and the change in net unrealised gain, if any, is adjusted in the unrealisedappreciation reserve.

l Up to March 31, 2000, the change in the net unrealised gain or loss in the value of investments between twobalance sheet dates was determined on a portfolio basis and recognised in the revenue account. Had the Schemenot changed its basis of determining and disclosing the change in net unrealised gain and loss in the value ofinvestments, its surplus for the year ended March 31, 2001 would have been higher by Rs. 1.12 million, unrealisedappreciation reserve at March 31, 2001 would have been lower by Rs. 21.39 million and retained surplus at thatdate would have been higher by the same amount. Consequently, this change has not impacted the net assets ofthe Scheme as at March 31, 2001.





l The purpose of equalisation account is to maintain per unit amount of a Plan's share of the Scheme's undistributedincome earned during the accounting period, so that continuing unitholders' share of undistributed income remainsunchanged on issue or redemption of units under that Plan.

l When units are issued or redeemed, the total undistributed income from the beginning of the accounting period tothe date of the transaction is determined. Based on the number of units outstanding on the transaction date, theundistributed income associated with each unit is computed. The per unit amount so determined is credited anddebited to the equalisation account on issue and redemption of each unit respectively.


Quantity Amount

2001 2000 2001 2000

3. UNIT CAPITAL


Dividend Plan

Units outstanding, beginning of year 245,963,027.648 � 2,459,630 �

Units issued 165,545,318.235 437,230,220.390 1,655,453 4,372,302

Units redeemed (307,800,621.202) (191,267,192.742) (3,078,006) (1,912,672)


Growth Plan

Units outstanding, beginning of year 47,542,570.328 � 475,426 �

Units issued 262,270,132.126 176,572,820.495 2,622,701 1,765,728

Units redeemed (205,478,826.080) (129,030,250.167) (2,054,789) (1,290,302)

Units outstanding, end of year 104,333,876.374 47,542,570.328 1,043,338 475,426

Total

Units outstanding, beginning of year 293,505,597.976 � 2,935,056 �

Units issued 427,815,450.361 613,803,040.885 4,278,154 6,138,030

Units redeemed (513,279,447.282) (320,297,442.909) (5,132,794) (3,202,974)



M a r c h 3 1, 2 0 0 1



2001 2000


Dividend Plan



Net premium on issue/redemption of units (39,995) 28,933

Balance, end of year (11,062) 28,933



Change in net unrealised appreciation in value of investments

in Central Government securities (5,903) �


Retained surplus





73,826 80,270

Growth Plan



Net premium on issue/redemption of units 95,549 2,946




Change in net unrealised appreciation in value of investments

in Central Government securities 7,019 �


Retained surplus





325,790 65,082

Total 399,616 145,352







15,045 27,348


M a r c h 3 1, 2 0 0 1



6. INVESTMENTS IN CENTRAL GOVERNMENT SECURITIES


(ii) Aggregate appreciation and depreciation in the value of investments in Central Government securities are as follows:

2001 2000



(iii) The aggregate value of investments acquired and sold/redeemed during the year are Rs. 28,453 million

(2000 � Rs. 12,724 million) [1,027 per cent (2000 � 738.55 per cent) of average daily net assets] and Rs. 28,935

million (2000 � Rs. 9,651 million) [1,045 per cent (2000 � 560.18 per cent) of average daily net assets] respectively.

2001 2000





Other current assets 36,869 �

88,605 112,152

8. INTEREST



292,557 147,727


The Scheme pays fees for investment management and trusteeship services under separate agreements with the AMC and

the Trustee. Management and trusteeship fee are payable at an annual rate of 0.75 per cent and 0.01 per cent respectively,

of the Scheme's average daily net assets.


The total income (excluding net unrealised gain in value of investments) and expenditure and these amounts as a percentage


2001 2000

Income

� amount 394,138 212,254


Expenditure

� amount 34,282 16,280


For the period ended March 31, 2000, on an annualised basis, the total income and expenditure were 15.82 per cent and

1.21 per cent respectively of the Scheme's average daily net assets.


M a r c h 3 1, 2 0 0 1



11.NET ASSET VALUE

2001 2000


Dividend Plan 10.712 10.326

Growth Plan 13.123 11.369


including the respective unit capital and reserves and surplus.



amounts relating to the revenue account are for a period of approximately nine months and are therefore not directly



M a r c h 3 1, 2 0 0 1




As at As at

31-Mar-01 31-Mar-00

Rs. Rs.




of investment, per unit 0.061 0.015

iii) Income from profit on sale of investment to third party, per unit 0.410 0.205


b) Less : Aggregate of expenses, write off, amortisation

and charges, per unit (0.165) (0.055)

c) Less : Unrealised depreciation in value of investments, per unit 0.000 0.000


e) Net Income per unit 1.735 0.738

Add : Equalisation Credit & Unit Premium Reserve 0.487 0.316

Reserve of the previous year 0.545 0.000

Less : Dividend Distribution and Dividend Tax (0.847) (0.557)

Growth per Unit 1.921 0.496

As at 31-Mar-01 As at 31-Mar-00

Growth Dividend Growth Dividend

Plan Plan Plan Plan

f) Net Asset Value per unit 13.123 10.712 11.369 10.326


i) Highest 13.250 11.163 11.460 10.790

ii) Lowest 11.505 10.087 10.000 10.002


i) Highest 13.250 11.163 11.460 10.790

ii) Lowest 11.505 10.087 10.000 10.002


unrealised losses) to average daily net assets (%) 1.24 1.21

Ratio of gross income (excluding realised and

unrealised income) to average daily net assets (%) 14.23 15.82

j) P. E. Ratio N.A. N.A. N.A. N.A.



TILFTEMPLETONINDIA LIQUIDFUND

To the Trustee of

Templeton Mutual Fund - Templeton India Liquid Fund :

We have audited the balance sheet of TEMPLETON MUTUAL FUND - TEMPLETON INDIA LIQUID FUND as at March 31, 2001






TEMPLETON MUTUAL FUND - TEMPLETON INDIA LIQUID FUND as at March 31, 2001 and of its surplus for the year then

ended.








Auditors' Report


M a r c h 3 1, 2 0 0 1


L i q u i d F u n d


M a r c h 3 1, 2 0 0 1


L i q u i d F u n d


Note 2001 2000

SOURCES OF FUNDS

Unit capital 2(b) & 3 2,623,448 625,386



3,095,866 752,097


Investments 2(c), 6 & 14 2,522,478 477,059

Deposits 7 418,717 185,700


3,095,866 752,097









M a r c h 3 1, 2 0 0 1


L i q u i d F u n d



Note 2001 2000

INCOME

Interest 2(d) & 9 379,262 74,503

Profit on sale/redemption of investments, net 2(d) � 1,234

Profit on inter-scheme transfer/sale of investments, net 2(d) 2,590 �

Other income 543 505

382,395 76,242

EXPENSES AND LOSSES

Loss on inter-scheme transfer/sale of investments, net 2(d) � 1,027

Loss on sale/redemption of investments, net 2(d) 788 �



Registrar service charges 3,863 594

Commission to distributors 7,414 788


Audit fee 150 40


37,967 8,604


Equalisation debit 2(e) (25,875) (4,718)

Income distribution on capital account

Dividend Plan (81,495) �

Income-tax on income distributed (16,915) �

Retained surplus, end of year 4 220,143 62,920








M a r c h 3 1, 2 0 0 1


L i q u i d F u n d


1. BACKGROUND

Templeton Mutual Fund - Templeton India Liquid Fund ('the Scheme') was launched on June 17, 1998 as an open endedmutual fund scheme. In April 2000, a Dividend Plan was launched under the Scheme with a view to declare periodicdividends. Accordingly, the Scheme now has two plans: the Growth Plan and the Dividend Plan.


The primary investment objective of the Scheme is to provide income and liquidity consistent with a portfolio comprisingsubstantially money market and debt instruments.




l The net asset value of the units of the Scheme is determined separately for units issued under the Dividend andGrowth Plans ('the Plans').

l For reporting the two net asset values, the funds received under each Plan and their deployment are separatelyaccounted for. Further, income arising from such deployment, including unrealised gain or loss in the value ofinvestments, are separately determined and accounted for each of the Plans. Expenses incurred by the Schemeare allocated to the Plans in proportion to their average daily net assets

(b) Unit capital


l Upon issue and redemption of units, the net premium or discount, if any, to the face value of units is adjustedagainst the unit premium reserve of the Scheme, after an appropriate portion of the issue proceeds and redemptionpayouts is credited or debited respectively to the equalisation account, a mandatory requirement for open endedmutual fund schemes.

(c) Investments


l Purchase and sale of investments are recorded on the date of the transaction, at cost and sale price respectively,after considering brokerage, commission, and fees payable or receivable, if any. Any front-end discount on privatelyplaced investments is reduced from the cost of such investments.


l Investments in securities, which have traded during a period of thirty days prior to the balance sheet date arestated at the closing prices on the balance sheet date or the last trading day before the balance sheet date, as maybe applicable, on the stock exchange where a majority (in terms of value) of these securities are principally traded.

l Other investments in fixed income securities, being securities maturing within 182 days from the date of theirpurchase or as at the balance sheet date, are stated at carrying cost, which includes discount accrued on a straightline basis over the period to maturity.

l Investments in commercial paper are stated at carrying cost, which includes discount accrued on a straight linebasis over the period to maturity.






M a r c h 3 1, 2 0 0 1


L i q u i d F u n d


l The purpose of equalisation account is to maintain per unit amount of a Plan's share of the Scheme's undistributedincome earned during the accounting year, so that continuing unitholders' share of undistributed income remainsunchanged on issue or redemption of units under that Plan.



Quantity Amount

2001 2000 2001 2000

3. UNIT CAPITAL


Dividend Plan

Units issued 938,914,595.044 � 9,389,146 �

Units redeemed (807,932,997.785) � (8,079,330) �

Units outstanding, end of year 130,981,597.259 � 1,309,816 �

Growth Plan

Units outstanding, beginning of year 62,538,593.979 15,222,830.316 625,386 152,228

Units issued 2,078,734,569.191 1,101,208,904.750 20,787,346 11,012,089

Units redeemed (2,009,909,999.793) (1,053,893,141.087) (20,099,100) (10,538,931)


Total

Units outstanding, beginning of year 62,538,593.979 15,222,830.316 625,386 152,228

Units issued 3,017,649,164.235 1,101,208,904.750 30,176,492 11,012,089

Units redeemed (2,817,842,997.578) (1,053,893,141.087) (28,178,430) (10,538,931)


2001 2000



Dividend Plan (4,770) �

Growth Plan


Net premium on issue/redemption of units 67,256 �


102,510 40,024

Retained surplus

Dividend Plan 6,614 �

Growth Plan




295,297 75,154

Total 397,807 115,178


M a r c h 3 1, 2 0 0 1


L i q u i d F u n d



Trusteeship fee 2 2



74,611 11,533

6. INVESTMENTS

Privately placed debentures 1,280,116 200,000

Other debentures and bonds 1,094,360 50,521

Central Government securities � 78,250

Commercial paper 148,002 148,288

2,522,478 477,059


(ii) The aggregate value of investments acquired and sold/redeemed during the year were Rs 24,117 million

(2000 � Rs. 6,346 million) [639 per cent (2000 � 831.50 per cent) of average daily net assets] and Rs. 21,993 million

(2000 � Rs. 5,963 million) [583 per cent (2000 � 781.23 per cent) of average daily net assets] respectively.

(iii) Debentures amounting to Rs. 1,280 million (2000 � 200 million) obtained through private placements are not listed on

any stock exchange and, accordingly, have not been traded during a period of thirty days prior to March 31, 2001.

Further, other debentures and bonds amounting to Rs. 1,094 million (2000 � Rs. 50.52 million) have not been traded

during a period of thirty days prior to March 31, 2001.

(iv) During the year ended March 31, 2001, the Scheme has invested in the debentures and bonds of certain companies,

which have invested in some of the schemes of the Fund during a period of one year before or after the date of the

Scheme's investment, in excess of five per cent of those schemes' net assets. The Scheme's investments in these


2001 2000



Housing Development Finance Corporation Limited 50,130 �

416,095 578,288




These investments have been made on account of the high credit quality for comparable yield for the investment and

are in accordance with the investment objectives of the Scheme.

2001 2000

7. DEPOSITS

Scheduled banks 161,800 185,700

Companies / institutions 256,917 �

418,717 185,700

2001 2000


M a r c h 3 1, 2 0 0 1


L i q u i d F u n d



Sundry debtors for units issued to investors 471 2,707


Other current assets 63,931 5

154,671 89,338

9. INTEREST




Commercial paper 13,001 13,587

Certificates of deposit 7,662 134

379,262 74,503

10.MANAGEMENT AND TRUSTEESHIP FEE


of such fee at an annual rate of 0.5 per cent of the Scheme's average daily net assets excluding the net asset value of the



assets.




2001 2000

Income

� amount 382,395 76,242


Expenditure

� amount 37,179 7,577


12.NET ASSET VALUE


Dividend Plan Rs. 10.014 �



including the unit capital and reserves and surplus, and reducing the net accumulated unit discount, if any.


Prior year amounts have been reclassified, wherever applicable, to conform to current year's presentation.

2001 2000


M a r c h 3 1, 2 0 0 1


L i q u i d F u n d


CLASSIFICATION

Details of investment portfolio and industrywise classification of the Scheme's investments in privately placed debenturesand other debentures and bonds as at March 31, 2001 are presented below. The industry and company exposures arestated as a percentage of the Scheme's net assets as at March 31, 2001, as well as the aggregate investments in eachinvestment category.

Percentage Percentageto to investment



Financial Services 11,800,000 1,180,116 39.06 92.19Rabo India Finance Private Limited 3,000,000 300,000 9.94 **23.44GE Capital Services India Limited 2,500,000 250,000 8.27 **19.53Infrastructure Leasing & Financial Services Limited 2,500,000 249,990 6.62 **15.62Citicorp Maruti Finance Limited 1,500,000 150,126 4.97 **11.73Citicorp Finance (India) Limited 2,000,000 200,000 6.62 **15.62Ford Credit Kotak Mahindra Limited 300,000 30,000 0.99 **2.34

Electronics 1,000,000 100,000 3.31 7.81BPL Limited 1,000,000 100,000 3.31 **7.81

Total 1,280,116 42.37 100.00


Banks and Financial Institutions 3,601,899 372,391 12.33 34.03ICICI Limited 3,600,000 353,914 11.71 **32.34Industrial Development Bank of India 1,899 18,477 0.62 **1.69

Diversified 2,500,000 250,000 8.27 22.84Reliance Industries Limited 2,500,000 250,000 8.27 **22.84

Financial Services 2,200,000 221,505 7.33 20.25GE Capital Services India Limited 1,200,000 120,195 3.98 **10.99Citicorp Finance (India) Limited 1,000,000 101,310 3.35 **9.26

Automobiles - LCVs / HCVs 1,000,000 100,289 3.32 9.16Tata Engineering & Locomotive Company Limited 1,000,000 100,289 3.32 **9.16

Diversified 1,000,000 100,045 3.31 9.14Larsen & Toubro Limited 1,000,000 100,045 3.31 **9.14

Banks and Financial Institutions 500,000 50,130 1.66 4.58Housing Development Finance Corporation Limited 500,000 50,130 1.66 **4.58

Total 1,094,360 36.22 100.00

COMMERCIAL PAPER

Diversified 98,822 3.27 66.77Larsen & Toubro Limited 98,822 3.27 66.77

Financial Services 49,180 1.63 33.23Cholamandalam Investment & Finance Company Limited 49,180 1.63 33.23

Total 148,002 4.90 100.00

DEPOSITS 418,717 13.86


TOTAL ASSETS 3,095,866 102.47


NET ASSETS 3,021,255 100.00

** Untraded/ thinly-traded securities


M a r c h 3 1, 2 0 0 1


L i q u i d F u n d


As at As at As at

31-Mar-01 @ 31-Mar-00 31-Mar-99

Rs. Rs. Rs.


i) Income other than profit on sale of investment, per unit 1.4477 1.1994 0.8069



iii) Income from profit on sale of investment to third party, per unit (0.0030) 0.0033 0.0074

iv) Transfer to revenue account from past year�s reserve, per unit 0.0000 0.0000 0.0000

b) Less : Aggregate of expenses, write off, amortisation

and charges per unit (0.1417) (0.1211) (0.0769)

c) Less : Unrealised depreciation in value of


d) Add : Unrealised appreciation in value of investments, per unit 0.0000 0.0000 0.0000

e) Net Income per unit 1.3129 1.0816 0.7377

Add : Equalisation Credit & Unit Premium Reserve 0.2921 0.5645 0.0660

Reserve of the previous year 0.2865 0.1956 0.0000

Less : Dividend Distribution and Dividend Tax (0.3751) 0.0000 0.0000

Growth per Unit 1.5164 1.8417 0.8037

As at 31-Mar-01

Growth Dividend

Plan Plan

f) Net Asset Value per unit 13.0144 10.0143 11.8417 10.8037


i) Highest 13.0121 10.0188 11.8417 10.8037

ii) Lowest 11.8488 10.0000 10.8070 10.0000


i) Highest 13.0121 10.0188 11.8417 10.8037

ii) Lowest 11.8488 10.0000 10.8070 10.0000


unrealised losses) to average daily net assets (%) 0.99 0.99 1.00

Ratio of gross income (excluding realised and

unrealised income) to average daily net assets (%) 10.13 9.99 10.84

j) P. E. Ratio N.A. N.A. N.A. N.A.



@ Since the Dividend Plan of Templeton India Liquid was launched on April 6, 2000 the corresponding previous year's

figures are not available.


M a r c h 3 1, 2 0 0 1

T e m p l e t o n

M u t u a l F u n d

TEMPLETON MUTUAL FUNDTempleton Mutual Fund (TMF) has been constituted as a trust on January 4, 1996 in accordance withthe provisions of the Indian Trusts Act, 1882 and the Mutual Fund is duly registered under the IndianRegistration Act, 1908. TMF has been sponsored by Templeton International Inc., (liability restrictedto Rs. l lakh) with Templeton Trust Services Pvt. Ltd. (the "Trustee") as the Trustee. The Trustee hasentered into an Investment Management Agreement dated January 5, 1996 with Templeton AssetManagement (India) Pvt. Ltd. to function as the Investment Manager for all the schemes of TMF. TMFis registered with SEBI on February 19, 1996.

TEMPLETON INTERNATIONAL INC.Templeton International Inc. (TII) is a part of the Templeton Group which is one of the largestInvestment Management Company with US $216 billion in assets under management as on March 31,2001 and more than 10 million Shareholder Accounts. Templeton has offices in several countriesincluding the United States, Bahamas, Canada, Argentina, France, Germany, Italy, Luxembourg, Poland,Russia, The United Kingdom, Hong Kong, Singapore, India, Vietnam, Australia & South Africa.

TEMPLETON TRUST SERVICES PVT. LTD.Templeton Trust Services Pvt. Ltd. has been incorporated under the Companies Act, 1956 and is thetrustee to Templeton Mutual Fund. The Trustee would ensure that the Fund and the Schemes floatedthereunder are managed by the AMC in accordance with the Trust Deed, the regulations, directionsand guidelines issued by SEBI, the Stock Exchange and other regulatory agencies.

BOARD OF DIRECTORS OF TEMPLETON TRUST SERVICES PVT. LTD.l Samuel J. Forester, Jr. Managing Director, Templeton Worldwide, Inc.

l Gregory E. McGowan, Executive Vice President, Templeton Worldwide, Inc.

l Mr. Anand J. Vashi, Chartered Accountant

l Mr. Percy J. Pardiwalla, Advocate

l Mr. Bharat Doshi, Company Executive

TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD.Templeton Asset Management (India) Pvt. Ltd. (TAMIL) is incorporated under the Companies Act, 1956and is the Investment Manager of Templeton Mutual Fund. The current paid-up equity capital of theCompany is Rs.59.33 crores with 75% being held by Franklin Templeton Holding Ltd., Mauritius and24.99% being held by Hathway Investments Ltd. Hathway Investments is an Indian InvestmentCompany, a member of the Rajan Raheja Group of Companies.

As on March 31, 2001, Templeton Mutual Fund has launched nine schemes namely, Templeton IndiaGrowth Fund (TIGF), Franklin India Growth Fund (FIGF), Templeton India Income Fund (TIIF),Templeton India Liquid Fund (TILF), Templeton India Government Securities Fund (TGSF), TempletonMonthly Income Plan (TMIP), Franklin India Index Fund (FIIF), Franklin India Balanced Fund (FIBF)and Franklin India Index Tax Fund (FITF). All the schemes are currently open and available for ongoingpurchases.

Unitholders� Information


M a r c h 3 1, 2 0 0 1

T e m p l e t o n

M u t u a l F u n d

BOARD OF DIRECTORS OF TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD.l Mr. Charles E. Johnson, President, Franklin Templeton International

l Mr. Vijay C. Advani (Alternate Director to C.E. Johnson), Managing Director, Templeton AssetManagement Ltd., Singapore

l Dr. J. Mark Mobius, Managing Director, Templeton Emerging Markets Group

l Mr. Rajan Raheja, Industrialist

l Mr. Deepak M. Satwalekar, Managing Director and CEO, HDFC Standard Life Insurance Co. Ltd.

l Mr. R Vaidyanathan, Managing Director, Integrated Enterprises (India) Ltd.

l Ms. Dina Wadia, Advocate and Solicitor Partner - Little & Co.

TEMPLETON INDIA GROWTH FUND (TIGF)The Investment objective of TIGF will be to provide long-term capital growth to its unitholders. Ason March 31, 2001, around 92% of the corpus of the scheme was invested in equity and equity relatedinstruments and the balance portion was invested in liquid assets and cash. The assets undermanagement as on March 31, 2001 is Rs.1,304.04 million.

TEMPLETON INDIA INCOME FUND (TIIF)The primary investment objective of TIIF is to generate a steady stream of income through investmentin fixed income securities. This shall be the fundamental attribute of the scheme. A secondary objectiveis to generate capital appreciation. The assets under management as on March 31, 2001 is Rs.15,355.86million.

TEMPLETON INDIA LIQUID FUND (TILF)The primary investment objective of TILF is to provide income and liquidity consistent with the prudentrisk from a portfolio comprising substantially of high quality money market and debt instruments. Toachieve this objective, the Scheme will invest in a wide range of fixed income and money marketinstruments. The assets under management as on March 31, 2001 is Rs.3,021.26 million.

TEMPLETON INDIA GOVERNMENT SECURITIES FUND (TGSF)The primary objective of the scheme is to generate credit risk-free return through investments insovereign securities issued by the Central Government and/or a State Government and/or any securityunconditionally guaranteed by the Central Government and/or State Government for repayment ofPrincipal and Interest. The assets under management as on March 31, 2001 is Rs.2,480.03 million.

TEMPLETON MONTHLY INCOME PLAN (TMIP)An Open-end income scheme with no assured returns

The objective is to earn regular income for investors through investment primarily in highly rateddomestic fixed income securities. The assets under management as on March 31, 2001 is Rs.1,551.07million.

FRANKLIN INDIA GROWTH FUND (FIGF)An open-ended scheme targeted at long-term capital appreciation through research based investmentsfrom a diversified portfolio invested predominantly in growth oriented equity and equity relatedsecurities. The assets under management as on March 31, 2001 is Rs.233.13 million.

FRANKLIN INDIA INDEX FUND (FIIF)The objective of the scheme is to invest in companies whose securities are included in the Nifty andsubject to tracking errors and endeavoring to attain results commensurate with the S&P CNX Nifty Index.The assets under management as on March 31, 2001 is Rs.192.38 million.


M a r c h 3 1, 2 0 0 1

T e m p l e t o n

M u t u a l F u n d

FRANKLIN INDIA BALANCED FUND (FIBF)The objective is to generate a combination of long term capital appreciation and current income froma portfolio that is invested both in equity and equity related securities and in fixed income and moneymarket securities. The assets under management as on March 31, 2001 is Rs.111.91 million.

FRANKLIN INDIA INDEX TAX FUND (FITF)The objective of the scheme is to invest in companies whose securities are included in the Nifty andsubject to tracking errors and endeavoring to attain results commensurate with the S&P CNX Nifty Index.The assets under management as on March 31, 2001 is Rs.13.01 million.

UNCLAIMED REDEMPTION AND DIVIDEND AMOUNTSThe amount of dividends declared and redemptions made, which were remaining unclaimed as onthe balance sheet date are as under:

Scheme Name Dividend Redemptions

No. of No. ofUnclaimed Amount Unclaimed Amount

warrants (Rs. in lacs) warrants (Rs. In lacs)

TIGF 286 5.84 6 1.29

TIIF 972 9.44 5 0.83

TGSF 157 16.89 � �

TMIP 1431 21.79 � �

FIIF � � 1 0.02

Total 2846 53.96 12 2.14

LARGE HOLDINGS IN THE SCHEMESThe following are the details of the large holdings (>25%) in the Schemes as on March 31, 2001:

% of HoldingScheme Name Name of the Investor to Net Assets

Franklin India Index Tax Fund Templeton Asset Management (India) Pvt. Ltd. 67.48

The investors should understand that the price and redemption value of the units, and income fromthem, can go up as well as down with the fluctuations in the market value of its underlying investments.

One should expect such fluctuations as realities of the market, and should continue to keep sight ofone's financial goals and maintain a long-term perspective towards one's investments.

On written request, present and prospective unit holder / investors can obtain copy of the trust deed,the annual report and the text of the relevant scheme. On written request, present and prospectiveunit holder / investors can also obtain a copy of the Annual Report of Templeton Asset Management(India) Pvt. Ltd.

For the Board of Trustee

Samuel J. Forester, Jr.Chairman


M a r c h 3 1, 2 0 0 1

T e m p l e t o n

M u t u a l F u n d

All Dividends are calculated on a face value of Rs. 10 per unit. Past performance may or may not be sustained in future.

Statutory Details : Templeton Mutual Fund in India has been set up as a trust by Templeton International Inc. (liability restricted to the seed corpusof Rs.1 lac) with Templeton Trust Services Pvt. Ltd. as the Trustee (Trustee under the Indian Trust Act 1882) and with Templeton Asset Management(India) Pvt. Ltd. as the Investment Manager. The Fund offers NAVs, purchases and redemptions on all business days.

Dividend History Since Inception

Date Dividend

TIGF

28 April, 2000 15%

TIIF

31 March, 1998 15%

15 March, 1999 13%

15 September, 1999 5%

15 December, 1999 2.50%

15 March, 2000 2.75%

24 May, 2000 2.00%

15 September, 2000 2.25%

15 December, 2000 2.00%

15 March, 2001 2.00%

Dividend

Monthly Quarterly Half-Yearly

TMIP

27 March, 2000 0.85%

25 April, 2000 0.85%

25 May, 2000 0.70%

23 June, 2000 0.60% 2.50%

25 July, 2000 NIL

25 August, 2000 0.60%

25 September, 2000 0.60% 0.65% 3.00%

25 October, 2000 0.60%

24 November, 2000 0.60%

22 December, 2000 0.60% 2.00%

25 January, 2001 0.60%

23 February, 2001 0.75%

23 March, 2001 0.75% 2.50% 2.50%

Dividend

TGSF

15 September, 1999 2.50%

15 December, 1999 2.25%

15 March, 2000 3.25%

24 May, 2000 2.25%

15 September, 2000 2.00%

15 December, 2000 2.50%

15 March, 2001 2.50%

Date Dividend

TILF

09 April, 2000 0.0216216200%16 April, 2000 0.1018018200%23 April, 2000 0.1009009000%30 April, 2000 0.1072072100%07 May, 2000 0.1116341200%14 May, 2000 0.1123008600%21 May, 2000 0.1349783300%28 May, 2000 0.1264640727%04 June, 2000 0.1096319025%11 June, 2000 0.1392268200%18 June, 2000 0.1559952509%25 June, 2000 0.1881568864%02 July, 2000 0.1654820264%09 July, 2000 0.1192221739%16 July, 2000 0.1266683608%23 July, 2000 0.1440090256%30 July, 2000 0.1247640058%06 August, 2000 0.1409288822%13 August, 2000 0.1905118495%20 August, 2000 0.2123032118%27 August, 2000 0.2145249253%03 September, 2000 0.1981230029%10 September, 2000 0.1739020934%17 September, 2000 0.1493558909%24 September, 2000 0.1464648692%01 October, 2000 0.1396928251%08 October, 2000 0.1256539173%15 October, 2000 0.1391548496%22 October, 2000 0.1359390630%29 October, 2000 0.1378908045%05 November, 2000 0.1377916310%12 November, 2000 0.1494334828%19 November, 2000 0.1399435048%26 November, 2000 0.1332432664%03 December, 2000 0.1275271665%10 December, 2000 0.1235608840%17 December, 2000 0.1113165457%24 December, 2000 0.1208956261%31 December, 2000 0.1378861425%07 January, 2001 0.1266886889%14 January, 2001 0.1267626967%21 January, 2001 0.1323667500%28 January, 2001 0.1323141451%04 February, 2001 0.1285901806%11 February, 2001 0.1165889092%18 February, 2001 0.1193552212%25 February, 2001 0.1099986112%04 March, 2001 0.1223325545%11 March, 2001 0.1174970921%18 March, 2001 0.1202765383%25 March, 2001 0.1224372696%

Risk factors : All investments in mutual funds and securities are subject to market risks and the NAVs of the schemes may go up or down dependingupon the factors and forces affecting the securities market including the fluctuations in the interest rates. There can be no assurance that schemes'investment objectives will be achieved. The past performance of the mutual funds managed by the Franklin Templeton Group and its affiliates is notnecessarily indicative of future performance of the schemes. TIGF, FIGF, FIIF, FIBF, FITF, TIIF, TMIP, TGSF and TILF are only the names of the schemesand do not in any manner indicate the quality of the schemes, their future prospects or returns. The Mutual Fund is not guaranteeing or assuring anydividend under any of the schemes. The Mutual Fund is also not assuring that it will make any dividend distributions under the dividend plans of theschemes though it has every intention of doing so. All dividend distributions are subject to the investment performance of the schemes. Theinvestments made by the schemes are subject to external risks on transferring, pricing, trading volumes, settlement risks etc. of securities and henceredemptions may be delayed inordinately. The schemes may invest in various derivative instruments including Index futures which are untestedinstruments in India Markets and may carry high risk return ratio and may also invest in overseas instruments which is subject to forex fluctuationrisks. In the cases of Franklin India Index Fund and Franklin India Index Tax Fund (FITF), the existence, accuracy and performance of the S&P CNX NiftyIndex will directly affect the schemes performance and tracking errors are inherent in any Index Fund. The tracking errors in FITF are expected to bearound 2% per annum but may vary substantially due to several factors. All subscriptions in Franklin India Index Fund will be subject to a lock-in periodof 20 calendar days. All subscriptions in Franklin India Index Tax Fund are subject to a lock-in-period of 3 years and the unitholder cannot redeem,transfer, assign or pledge the units from the date of allotment. The Trustee, AMC, their directors or their employees shall not be liable for any of thetax consequences that may arise, in the event that the Scheme is wound up before the completion of the lock-in period. In the case of Franklin IndiaBalanced Fund, in the event that the investible funds of more than 50% of the total proceeds of the scheme are not invested in equity shares, thentax exemption on income distribution may not be available to the fund. Please call the Templeton Investor Service Centre numbers to obtain a copyof the offer document and go through the same before investing.

116

T e m p l e t o n

M u t u a l F u n d

alokgraphics

Franklin Templeton Service Centres

City Contact Addresses of Templeton Asset Management (India) Pvt. Ltd. Phone

Ahmedabad Ekta Haryani Dishman Business Centre, 301-306, Samudra Annexe 079-6568935

Off C. G. Road, Navrangpura, Ahmedabad 380 009

Bangalore Mona Teresa DBS Corporate Club, 26, Cunningham Road 080-2267272

Bangalore 560 052

Chennai Priya M. N. DBS Executive Club, 1st Floor, 31/A, Cathedral Garden Road 044-8275191

Chennai 600 034

Hyderabad Madhuri Sharma DBS Corporate Club, 111-115, Chenoy Trade Centre 040-7846970

Park Lane, Secunderabad 500 003

Kochi Anugeetha Sabu C/o. Business Communication Centre 0484-363116

Chiramal Chambers, Ground Floor, Kurisupally Road

Kochi 682 015

Kolkata Sharmistha Pande DBS Corporate Club, Suite No. 303, 2nd Floor, 033-2405264

8, A.J.C. Bose Road, Kolkata 700 017

Lucknow Sunanda Raina The Business Bridge, 1st Floor 0522-237289

Saran Chambers 2, 5-Park Road, Lucknow 226 001

Mangalore Anjali Shetty C/o. Raj Business Centre, Raj Towers, Balmatta Road 0824-425282

Mangalore 575 001

Mumbai Debita Ray Sakhar Bhavan, 1st Floor 022-2886123

230, Backbay Reclamation 1600-117283

Nariman Point, Mumbai 400 021 (Free phone)

New Delhi Meera Chawla International Business Centre 011-3329000

M-38/1, 3rd Floor, Connaught Place, New Delhi 110 001

Pune Prerna Prasad Masters Executive Centre Pvt. Ltd., Cabin No. 15 & 16 020-4016334

Citi Point, Dhole Patil Road, Pune 411 001

Contact Franklin Templeton Services at : [email protected]

Templeton Asset Management (I) Pvt. Ltd.

Sakhar Bhavan, 1st Floor

230, Backbay Reclamation, Nariman Point, Mumbai 400 021

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