Franklin Templeton MF gets in touch with investors for voting process

After winding up its six debt schemes, Franklin Templeton Mutual Fund has now taken the first step towards returning investors' money as it has started getting in touch with them with regard to voting process to get their consent.

However, a negative outcome in the voting may delay the process to liquidate assets of the scheme and payment of money to investors, the fund house said.

The move comes days after markets regulator Sebi asked the fund house to focus on repaying investors at the earliest.

In a letter to investors on Thursday, Franklin Templeton India President Sanjay Sapre said,” Franklin Templeton is committed to ensuring an orderly and equitable exit for all investors at the earliest possible time and we have been working hard to expedite the process of returning your money.”

The upcoming voting exercise is one such important step in that direction, he said.

He reiterated that winding up of these six schemes was to preserve the value of investments and return investors' money at the earliest.

Explaining about the voting process, Sapre said as a part of the winding up process, trustees need authorisation from investors to return the money at the earliest.

Once the trustees receive authorisation, next steps include monetisation of assets and distribution of money from the respective schemes.

An important point to note is that the payment schedule or payouts can be finalised and implemented only after the successful completion of the voting process.

He, further, said trustees will also be appointing an independent advisor to assist with the liquidation of the portfolios.

The fund house said its immediate focus is on getting ready for the voting process and making it as convenient and easy as possible for investors to cast vote.

“Over the next few days, our trustees will send investors in the six schemes under winding up, an e-mail with a “notice” related to the “Voting Process”. The notice will be sent for each scheme separately. The voting activity will be conducted separately for each of the six schemes,” Sapre said.

He also tried to clear some misconceptions regarding the purpose of the voting exercise.

“Some investors believe that by voting in the negative, the winding up will be reversed and that the six schemes will recommence the redemption and subscription process. This is not true,” Sapre said.

The purpose of the vote is to authorize the trustees to take the next steps for disposal of the assets of the scheme and distribution of the proceeds to the unitholders in accordance with regulations.

“If trustees do not receive authorization to proceed with disposal of assets of the scheme, this may delay the process of monetising such assets and distribution of proceeds,” Sapre said.

The fund house said that it continues to receive inflows regularly and all maturities and other commitments have been received as per schedule thus far.

“We continue to see a marked reduction in borrowing levels across some of our funds under winding-up, as we receive these cash flows via coupons, scheduled maturities and prepayments,” he said.

Also, he assured investors that the schemes will explore all opportunities to monetise the underlying assets in the portfolio before the maturity date, without resorting to distress sales, to return investors' money at the earliest possible time.

“It will be the endeavour of the schemes to return these monies well in advance of the maturity dates of the underlying securities," he added.

Last month, the fund house had closed six of its debt funds, citing redemption pressures and lack of liquidity in the bond markets.

These schemes, together having an estimate amount of over Rs 25,000 crore assets under management, were Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.