Franklin Templeton crisis: Affected investors to vote and decide if fund trustees or Deloitte will liquidate the schemes

The fund house had already appointed Kotak Mahindra Bank to assist it in liquidating the schemes

May 28, 2020 / 08:07 AM IST

Franklin Templeton mutual fund is getting ready to kick-start the liquidation process of its six wound-up debt schemes. In a letter that it shared with its distributors earlier today, the fund house has explained its plans of starting the liquidation process. Moneycontrol has a copy of this letter.

It will shortly ask its investors to choose between its own trustees or Deloitte Touche Tohmatsu India LLP (an audit and consulting firm) for liquidating the assets of the six wound-up schemes. Investors also have the third option of choosing neither, in which case the fund house says that the monetisation of the schemes will get delayed.

What the choices entail

If investors authorize Deloitte to wind up the schemes, then the fund house and Kotak Mahindra Bank – the independent advisor appointed for winding up these schemes – will assist the consulting firm in selling the underlying assets. In this case, Deloitte will take the decisions as to when and at what price it would sell the underlying securities of all the six schemes.

Kotak Mahindra Bank will also come on board to help the trustees as well, in case the majority of Templeton’s investors choose to give the mandate to the fund house’s trustees.

Close

The letter has not yet give the date on which the voting would begin. But industry officials who are close to the development say that the letter – along with the notice and the final voting dates – will be sent by the fund house in “a matter of days.” The voting is likely to begin around 11 days after the notice goes to the investors by email and voting will be open for three days. On the fourth day, the fund house has also arranged for a video conference (VC), where investors will be invited to have a video conversation with the Templeton trustees. This VC will give a chance to Templeton’s investors to chat with the fund house’s trustees and clarify any doubts they may have about the six wound up schemes, how and when the liquidation may happen, when are they likely to get back their money and so on.

Getting back the money

The letter to distributors also mentions that once the bonds of the  schemes are sold, the fund house will first return the amounts due to banks from which it had borrowed money, and meet all its expenses. The balance amount will then be returned to the unit holders.

The fund house has assigned K Fintech (formerly Karvy Computershare) to carry out the voting process. An email link will be sent to the registered email ID of the primary account holder of every scheme. If the email ID has not yet been registered, but the investor’s mobile number is, then the notice will go to the person’s mobile.

The notice  will have a link that investors would have to click, visit the website and cast their vote. Investors who have neither their mobile numbers nor their email IDs registered, would not be allowed to vote. Each primary investor would get a chance to vote. If you hold multiple folios in a scheme, even then you will get one vote. However, investors get as many votes as the number of schemes they have invested in, among the six wound-up schemes.

On April 23, Franklin Templeton India wound up six of its debt funds: Franklin India Low Duration Fund (FILDF), 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 (FIIOF). Fresh subscriptions and redemptions were stopped because the fund house cited its inability to sell the underlying assets in the wake of the illiquidity in the markets.
Kayezad E Adajania
first published: May 27, 2020 08:58 pm

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