Franklin Templeton India Mutual Fund decided to shut down 6 schemes:
1) Franklin India Low Duration Fund
2) Franklin India Ultra Short Bond Fund
3) Franklin India Short Term Income Plan
4) Franklin India Credit Risk Fund
5) Franklin India Dynamic Accrual Fund
6) Franklin India Income Opportunities Fund
The decision to wind up was challenged by some investors. Now, Franklin is required to take consent of unit holders to wind up these schemes in an orderly fashion.
If you are invested in any of these schemes, watch this video to
1) understand how can you recover your money?
2) what should you vote for during the e-voting process on 26th to 28th Dec 2020?
Transcript:
In April 2020, Franklin Templeton Mutual Fund decided to shut down 6 schemes
Franklin India Low Duration Fund
Franklin India Dynamic Accrual Fund
Franklin India Credit Risk Fund
Franklin India Short Term Income Plan
Franklin India Ultra Short Bond
Franklin India Income Opportunities Fund
So if your money is invested in any of these 6 schemes, this video is very important for you.
In this video, I'll give you the latest updates regarding these schemes.
So, to know what you need to do to recover your money from these schemes, keep watching this video.
So, let's understand the background a bit.
In April 2020, Franklin decided to wind up these 6 schemes.
New purchases and redemptions were stopped in these 6 schemes.
And it was told that these schemes will sell their assets at an appropriate time and at the right price
Assets means the bonds in which these schemes have invested their money.
And whatever money that will be recovered after selling the assets will be paid back to the unitholders.
Unitholders means people like you who have invested their money in these schemes.
To wind these schemes up, Franklin had proposed two options.
First - Trustees of these schemes will manage the sale of assets
Second - Deloitte be appointed to manage the sale of assets and recover the money
To choose between the two, Franklin had called for voting in June 2020
But some investors filed an appeal in court that Franklin was not right in winding up these schemes at the first place without the consent of unitholders.
For the past 5-6 months, the case was going on. It went to high court and then to supreme court.
And finally supreme court ruled that Franklin was not right in winding the schemes up without taking consent of the investors.
So Franklin must take the consent from investors to wind up these schemes.
Now, Franklin has to take the consent from you i.e. unitholders to wind up these 6 schemes.
If majority of you vote in favor of winding these schemes, then only Franklin will be able to wind up the schemes.
Currently, redemptions and purchases are still not allowed in these schemes.
But before giving you an option to select who should manage the winding up of these schemes,
Trustees or Deloitte or some other company?
Franklin must conduct voting to decide if these schemes should be shut down or not?
This voting was not being conducted earlier.
This voting is going to take place from 26th Dec 2020 to 28th Dec 2020 and you must have got an email from Franklin if you have invested in these schemes. In the email, Franklin has recommended that you vote "Yes" - in favor of winding up the schemes.
If you vote "Yes", you will be giving consent to wind up these schemes. Please note that you have to vote separately for each scheme if you have invested in multiple schemes.
So if majority of the investors vote "Yes", these schemes will be eligible for winding up.
Post that, Franklin will conduct a second vote to decide who should manage the winding up process?
Should Franklin manage it themselves or appoint some other consultancy firm?
So, what should you do? Vote "Yes" or "No"?
See, Franklin is asking you to vote "Yes" so that schemes get the permission to wind up. But what's the advantage of that?
With winding up, redemptions will not be allowed in these schemes. And not even purchase.
You might think that it's your loss if redemptions are not allowed.
See, we need to understand that if these schemes open up for redemption
A lot of people will place redemption orders in panic
And these schemes don't have enough money to return to all the investors at the moment.
So the schemes will be forced to sell their assets as a lower price in the market to return the money to investors.
Because of this, the existing investors will suffer a huge loss.
And for the same reason, trustees of Franklin took the decision to wind up the schemes and stop the redemptions.
Because if these was redemption pressure on these schemes, they didn't have liquid money to return to the investors.
These schemes have suffered due to covid crisis. The bonds are in illiquid state.
Meaning, these bonds can not be sold right away at the right price and recover the money.
But Franklin is confident that they will be able to liquidate these bonds at a right time at the right price and return maximum money to the investors.
So if you vote "No", these 6 schemes will be forced to open for purchase and redemption.
And there are very high chances that a lot of people will place redemption orders in panic which will lead to a loss for everyone.
If you vote "Yes", these schemes will not need to open for purchase and redemption.
So, Franklin will work towards selling the assets at right price at the right time and give back money to the investors.
Voting "Yes" has higher chances of getting maximum money back against voting "No" which has higher chances of making loss.
Recovery can take time though. Money will keep coming in parts as and when the schemes recover the money from their bonds.
But overall, voting "Yes" or in favor of winding up the schemes has higher chances of getting you maximum money back.
So, I'd also recommend you to participate actively in the voting process and vote "Yes" unless Franklin comes up with some other information by that time.
So, do vote on 26th to 28th Dec if you have invested in any of these 6 schemes. And vote in favor of winding up preferably.
You can read more about it on Franklin's website also.
Do post your questions in the comment sections :)
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