Home >Mutual Funds >Franklin Templeton issues notice for e-voting on 6 debt schemes

NEW DELHI: Franklin Templeton Mutual Fund has issued a notice to investors to conduct e-voting on the winding up of six debt schemes frozen on 23 April due to redemption pressure. Unit holders will have to decide between giving consent to the winding up decision or withholding it and letting the schemes reopen.

In October, the Karnataka High Court had ruled that unit holders’ consent is required for winding up the schemes. Franklin Templeton appealed against this decision in the Supreme Court which on 3 December had asked Franklin Trustees to proceed with voting to get unit holders’ consent.

According to the notice, e-voting will be held from 9 am on 26 December till 6 pm on 28 December. This will be followed by a meeting of unit holders through video conferencing on 29 December. Separate meetings will be held throughout the day on 29 December for each scheme alongside which e-voting will be permitted, starting with Franklin India Ultra Short Bond Fund from 9 am to 10.30 am.

An email from KFintech (formerly Karvy) which is a mutual fund registrar and transfer agent (RTA) will be sent to unit holders with a username and password. Unit holders can then proceed to to cast their vote. If unit holders already have a username and password with KFintech, the same can be used for the Franklin vote. The principle of one unit holder one vote will be followed.

Unit holders can use the e-voting credentials to join the virtual meeting on 29 December at Unit holders can request to speak at the meeting by providing their folio number/DP ID/client ID and mobile number in the window provided. Permission to speak will be provided on a first come first serve basis.

There are approximately 3 lakh unit holders in the six wound up Franklin Templeton schemes with an AUM of around 26,000 crore. Out of the 300,000 unit holders in the six schemes, 190,000 have investments below 2 lakh, the Franklin Templeton petition in the Supreme Court stated.

In its notice, Franklin Templeton Mutual Fund urged unit holders to cast a ‘yes’ vote and give consent to winding up. “The Trustee is of the view that if the decision to wind up the scheme in an orderly manner is not implemented, it would precipitate a rush of redemptions which would force a distress sale of portfolio securities likely resulting in a reduction in the net asset value of the scheme and substantial losses for unit holders," the notice said.

The six schemes present a mixed picture with some being substantially cash positive while others are still in debt. Franklin India Low Duration Fund, Franklin Ultra Short Bond Fund and Franklin India Dynamic Accrual Fund have cash levels of 48%, 46% and 33% of AUM respectively.

Franklin India Credit Risk Fund has a lower cash level of 14% of assets. In case of Franklin India Income Opportunities Fund and Franklin India Short Term Income Plan there is outstanding borrowing at 18.02% and 1.03% of assets respectively. The differing cash levels will affect how soon investors will receive their money in each scheme.

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