Franklin Templeton updates investors, focussed on returning ‘maximum possible value’ in ‘shortest possible time’

In a letter dated May 14, the fund-house reached out to investors of the six schemes being wound up, seeking their vote for winding up, and assuring the fund is aiming to return money at the earliest

Kumar Shankar Roy May 15, 2020

Debt FundsFranklin Templeton MF, which is shutting down six debt schemes holding investors’ assets worth Rs 26,000 crore, has in a fresh communication to unit holders provided an update on scheme borrowings, voting exercise and returning money. Signed by Sanjay Sapre, President, Franklin Templeton Asset Management (India) Pvt. Ltd., the letter begins by saying the winding up decision was the only viable way to preserve value for unit holders, despite the immediate challenges this may bring. Read on to know the key points.

Also read: SEBI tells Franklin MF to focus on returning money; counters blame on unlisted securities curbs

Re-payments

Franklin Templeton MF says that the six debt schemes being wound up continues to receive inflows regularly and all maturities and other commitments as per schedule so far.

The fund-house claims it sees a marked reduction in borrowing levels across some of the funds under winding-up, as it receives these cash flows via coupons, scheduled maturities and prepayments. Do remember that any scheme level borrowing will have to be repaid first, before allocating money to unit holders/investors. The borrowing in the schemes (undertaken as per SEBI’s regulations) is considered a liability for the scheme and has already been adjusted while determining the AUM. Effectively, the repayment of borrowing will not impact the net AUM, the fund-house claimed.

On concerns regarding the maturity profiles of the schemes, the fund-house said that the profile is based on maturity date and put / call dates of each of the securities. However, the schemes will explore all opportunities to monetise the underlying assets in the portfolio before the maturity date, without resorting to distress sales, such that funds can return investor monies at the earliest possible time. “It will be the endeavour of the schemes to return these monies well in advance of the maturity dates of the underlying securities,” Franklin Templeton MF said.

Also read: Live-tracking 6 shuttered Franklin debt funds: Which securities matured, which bonds sold so far

Voting

The winding up process of the six schemes involves further steps including a unitholder vote, which is required to authorise the Trustees to take the next steps as per Regulation 41 of SEBI (Mutual Fund) Regulation 1996.

Once the Trustees receive authorisation from unit holders/investors, next steps include monetisation of assets and distributing monies from the respective schemes.

The fund-house said that the payment schedule/payouts can only be finalised and implemented, post the successful completion of the voting process.

Trustees will also be appointing an Independent Advisor to assist with the liquidation of the portfolios.

Over the next few days, Trustees will send investors in the six schemes under winding up, an email with a “Notice” related to the “Voting Process”. The Notice will be sent for each scheme separately.

The voting activity will be conducted separately for each of the six schemes. In other words, an investor in one or more schemes (among the six schemes under winding up) will be required to vote separately for each scheme they hold investments in. If Trustees do not receive authorization to proceed with disposal of assets of the scheme, this may delay the process of monetising such assets and distribution of proceeds.

“Therefore, I urge you not to base your choice on market speculations or rumours. I sincerely request that you take the time to understand our decision in detail or speak to your advisor or reach out to us if you have any questions in this regard,” says Sapre.

Also read: 5 key points from Franklin Templeton India President’s podcast about 6 debt schemes being wound up

Returns

Franklin Templeton said it realises that the winding up decision for the six schemes has impacted its reputation, built painstakingly over the last 25 years. There couldn’t be a higher price to pay for the fund-house in terms of reputation and business, but it still went ahead.

“Our commitment to India and our investors remains steadfast, and our focus currently is to return the maximum possible value to all investors in the shortest possible time in these unprecedented times. This, we feel, is the only way to rebuild our brand reputation and more importantly, regain some of your trust,” Franklin Templeton MF said.

Unit holders can call the dedicated helpline at 1-800-258-4255 or 1-800-425-4255 from 8 a.m. to 9 p.m., Monday to Saturday or email at service@franklintempleton.com, for any further assistance.

Also read:

Franklin Ultra Short Bond Fund: What are the portfolio holdings, when can you get your money back

Franklin Templeton: What happened, and what next?


Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at kumarsroy@rupeeiq.com.

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