The Trustee of Franklin Templeton Mutual Fund in India has approached unitholders to seek consent for the winding up of the six fixed income schemes. A statement from the company says the consent has been sought under regulation 18 (15)(c) of SEBI (Mutual Funds) Regulations 1996 and as per the interim order issued by the Supreme Court on December 3.
The Trustee has partnered with 'K Fintech for the electronic voting process and the unitholders meeting to seek their content. Voting will take place on December 26-28 and the meeting of unitholders of the relevant schemes on December 29.
Franklin Templeton President Sanjay Sapre said: "We seek unitholders' constant for the orderly winding up and believe this will result in the best outcome. Unitholders' vote in favour of the orderly winding up allows us to maximise the return of the investment value without restricting to an emergency liquidation of securities."
The voting aims to seek majority consent of unitholders to wind up the six fixed income schemes in an orderly fashion. The company said the consent will be sought for each scheme separately.
"The Trustee believes that it will be beneficial for unitholders to vote 'yes' to the proposed resolution. The Trustee is of the view that an orderly liquidation would maximise the value of the portfolio assets for distribution of cash to unitholders on a prorated basis," the company said, adding there is a greater likelihood of realising fair value from the investment within a reasonable time.
The company said 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 the portfolio securities. This will also reduce the net asset value of the scheme and substantial losses for unitholders.
The Supreme Court last week had asked Franklin Templeton Mutual Fund to initiate steps in one week for calling a meeting of unitholders to seek their consent for the closure of six mutual fund schemes and said there will be no redemption of units by investors till further orders.
The top court also agreed to hear an appeal filed by Franklin Templeton against the Karnataka High Court order, which stopped the fund house from winding up its debt fund schemes without the prior consent of the investors.
The six schemes are Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund.
Franklin Templeton MF closed these six debt mutual fund schemes on April 23, citing redemption pressure and the lack of liquidity in the bond market. Till November 13, the six schemes received total cash flows of Rs 9,682 crore from maturities, prepayments and coupon payments since April 24, 2020.