Franklin Templeton MF to conduct e-voting on winding of debt schemes in December 2020

Franklin Templeton MF to conduct e-voting on winding of debt schemes in December 2020

On 6th December 2020 night, Franklin Templeton India mutual fund sent emails to its unitholders of six debt schemes to take their consent for winding up of the schemes. They will conduct the whole process through electronic mode.

The fund house has mentioned that voting will happen from 26th December 2020 9 am to 6.00 pm on 28th December 2020. Unitholders’ meeting with the trustees will be held through video conferencing on 29th December 2020 as per the below time schedule where unitholders can talk to the fund’s trustees.

Scheme Name	Time
Franklin India Ultra Short-Term Bond Fund	09.00 am to 10.30 am
Franklin India Low Duration Fund	10.45 am to 11.45 am
Franklin India Dynamic Accrual Fund	12.00 noon to 01.00 pm
Franklin India Credit Risk Fund	02.00 pm to 03.00 pm
Franklin India Income Opportunities Fund	03.15 pm to 04.15 pm
Franklin India Short Term Income Plan	04.30 pm to 05.30 pm

Unitholders can also exercise their voting rights during this meeting as well. This decision came out when SEBI told the Fund house that unitholders’ consent is must for winding up of the schemes. Unitholders can either vote in favor or against the winding up. Fund house has given the charge of conducting and monitoring the e-voting process to J. Sagar Associates.

The E- voting is a transparent and democratic process where each unitholder will be allowed to vote only once. Let us now look at the voting process:

If a unitholder vote in favor of winding up, then what is he/she is likely to get

1. There will be an orderly liquidation of securities held by unitholders at fair value. The proceeds generated from liquidation will be distributed amongst the unitholders in the proportion of units held by them.

2. It means recovery through maximum sale of securities held by the Fund

3. The concerned person can take the appropriate decision regarding liquidation process as there will be no selling pressure.

4. This option aims at avoiding distress sale so that Net Asset Value is not deteriorated.

5. Unitholders will not be in a position of asking for redemption as distribution of proceeds from liquidation will be allocated to them on pro rata basis.

If a unitholder vote against of winding up, then in that case he/she is willingly choosing distress sale option of securities.

1. It would put the pressure of immediate redemption on the schemes and Fund may have to re- open schemes immediately. At this point of time, no one can guarantee the viability of re-opening the schemes.

2. A high volume of redemption from unitholders would induce the Fund to opt distress sales at a time when markets are not ready to absorb huge sales of securities in the short run.

3. A distress sale would negatively impact Net Asset Value (NAV) causing huge losses to unitholders.

4. Unitholders will be in position to ask for redemption but there is no assurance of proportionate distribution of money amongst the unitholders.

5. There will be adjustments in the valuations as per the circumstances.

Note:Above mentioned points stand true for all the six schemes.

If majority of unitholders vote for winding up of schemes, then Franklin Templeton may immediately go ahead with second vote to seek consent from its six schemes’ unitholders to authorize the trustee for speedy winding up of the schemes. Unitholders would not have to wait for longer duration to get their money back.

The six schemes of Franklin Templeton Mutual Fund’s six schemes and their asset under management as on 1 December 2020 are mentioned below:

Scheme Name	AUM as on 1st Dec 2020(In Crores)	Cash available for distribution/ outstanding borrowing as on 1 December 2020 (In Crores)
Franklin India Ultra Short Bond Fund	10,128	4,683 (46.24% of AUM)
Franklin India Low Duration Fund	2,531	1,216 (48% of AUM)
Franklin India Short Term Income Plan	5441.02	56.09 (1.03% of AUM) outstanding borrowings
Franklin India Credit Risk Fund	3,570	499 (14% of AUM)
Franklin India Dynamic Accrual Fund	2,521	844 (33% of AUM)
Franklin India Income Opportunities Fund	1689.29	304.36 (18.02% of AUM) outstanding borrowings

Other important points

1. Valuation of NAV of all six schemes will be done on a daily basis.

2. If you have joint account, then first name will be given preference of voting rights.

3. https://evoting.kfintech.com. is the platform for e-voting and all the emails will come through M/s. KFin Technologies Pvt. Ltd.