Franklin Templeton Mutual Fund moves SC on winding up six schemes

By: |
November 23, 2020 8:23 PM

In October, the Karnataka High Court said the decision of the Franklin Templeton Trustee Services Private Limited to wind up six schemes cannot be implemented unless the consent of the unitholders is obtained.

Individually, Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund and Franklin India Credit Risk Fund have 49%, 48%, 34% and 16% of their respective assets under management (AUM) in cash.After Franklin Templeton was dragged to legal corridors, the Supreme Court ordered the fund house to seek consent of unitholders for winding up the six schemes that it has already shut down.

Franklin Templeton Mutual Fund on Monday said it has moved the Supreme Court against the Karnataka High Court order which stopped the fund house from winding up its debt fund schemes without prior consent of the investors.

In a letter to unitholders, Sanjay Sapre, President of Franklin Templeton MF, said post the high court judgement, the fund house considered all possible options over the last few weeks to start returning money to unitholders in the shortest possible time in an orderly manner. This included the option of seeking unitholders’ consent.

“After detailed deliberations, we have determined that it will be necessary to seek judicial intervention from the Hon’ble Supreme Court to ensure an appropriate implementation of the law in the best interest of unitholder,” Sapre said.

“This action took some time because these steps needed to be carefully and thoughtfully taken to ensure that we can return unitholder monies at the earliest in an equitable manner, without distress sale of securities (at steep discounts) that would occur if there is a rush of redemption,” he noted.

In October, the Karnataka High Court said the decision of the Franklin Templeton Trustee Services Private Limited to wind up six schemes cannot be implemented unless the consent of the unitholders is obtained.

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 lack of liquidity in the bond market.

Till November 13, the six schemes received total cash flows of Rs 9,682 crore from maturities, pre-payments and coupon payments since April 24, 2020.

The cash available stands at Rs 5,952 crore as of November 13 for the four cash positive schemes, subject to fund running expenses.

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