Imagine having money but not being able to withdraw it for emergencies or daily essentials.
That’s exactly what investors of Franklin Templeton have gone through in 2020. Not just them, the management too has been in distress and are looking for a solution to solve this crisis.
Here’s what transpired in April 2020:
Franklin Templeton Mutual Fund publicly announced that they wish to wind up 6 credit-focused debt schemes. This was not taken lightly and the issue reached court doors.
Due to the matter reaching court along with lockdown, the winding-up got delayed. But now investors get a chance to vote and decide the fate of those schemes.
Initial Voting Date – 26th-28th December (1st round)
Alloted Voting Time – 9 am (26th Dec) to 6 pm (28th Dec)
First Voting results – Undecided
Voting enrollment – Visit https://evoting.kfintech.com and cast your vote
First round Voting counting – In January 2021
Why voting is important?
Remote e voting is of the essence as the management of Franklin Templeton mutual fund can understand what the investors want. Here are the 6 schemes in question:
1. Franklin India Ultra Short Bond Fund
2. Franklin India Short Term Income Plan
3. Franklin India Credit Risk Fund
4. Franklin India Low Duration Fund
5. Franklin India Dynamic Accrual Fund
6. Franklin India Income Opportunities Fund
From April 2020 to November 2020 these 6 schemes under winding up have received over 11,576 crores from coupons, maturities, and pre-payments. The schemes have been faring well and hence investors are looking to redeem them immediately.
There are 2 scenarios post voting:
YES – If the investors vote for “YES” then as per Regulation 41, they allow the management of Franklin Templeton to decide on the redemption of funds. The trustees can do it themselves or authorize an independent consultant to plan and sell. There will be no need to make a distress sale immediately.
NO – If the investors vote for “NO” then as per rules, the funds will be reopened for investors to redeem or to make new purchases. As many investors want to withdraw their funds, there will be distress selling and the scheme will incur high losses.
Meeting on 29th – Investors can ask Trustees about this decision for the first time since April 2020. Voting will also be allowed in this meeting. Also, the trustees will ask the investors if they want to authorize the trustees to go ahead with the winding-up themselves or want to allow an independent consultant Deloitte to do the deed.
When will investors get their money back?
Please understand that you won’t get your money back in one shot. The redemption of your money will be made in timely installments. Only cash positive schemes (in profit) will be allowed to redeem.
The next round of hearings at the Supreme Court will resume in the 3rd week of January 2021. The results of evoting will be sent in a sealed cover to the court. A decision will be made accordingly.
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After this, the second round of voting will take place to give the investor’s approval for the authorized person to make the selling/redemption.
I believe, voting “YES” will allow you as investors to get the best out of your schemes. If they are sold via a distress sale, then it’s possible you might have to settle with lower or no profits. So vote accordingly.