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Franklin Templeton Mutual Fund updates investors on six schemes under winding up

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Franklin Templeton Mutual Fund receives full and final payment from Vodafone

Franklin Templeton Mutual Fund has received the full and final payment due from Vodafone, Sapre happily informs his investors.

“I am happy to inform you that further to the annual interest payment received on 12 June 2020 for the security ‘8.25% Vodafone Idea Ltd. (10-July-2020)’ held in the segregated portfolios of the six schemes under winding up, we have now received the full value of the principal due, along with interest for the period 12 June to 9 July 2020. This amount will be distributed to unitholders of the segregated portfolio. This is the full and final payment for this segregated portfolio and will be made by extinguishing all the outstanding units held by each unitholder therein,” says the letter.

Earlier this year in April, Franklin Templeton Mutual Fund decided to wind up its six schemes, namely, 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 Fund and Franklin India Income Opportunities Fund which were cumulatively holding assets worth 26,000 crore then.

For units held in physical/ statement of account mode, Franklin Templeton Mutual fund will extinguish and distribute all outstanding units as on 10 July 2020 to unitholders by 14 July 2020. For units held in demat mode, all outstanding units as on 17 July 2020 (i.e. the record date) will be extinguished and the amount will be distributed to unitholders by 20 July 2020.

Schemes continue to receive cash flows

The six schemes under winding up continue to receive cash flows, says Sapre in his letter. From June 16, 2020 to June 30, 2020, the schemes have received an additional 1,311 crore from maturities, pre-payments, and coupon payments. This takes the total amount received since April 24, 2020 to 3,275 crore.

The AMC has received a pre-payment of 420 crore from Nuvoco Vistas Corporation Ltd (NVCL) across two securities in Franklin India Ultra Short Bond Fund & Franklin India Dynamic Accrual Fund. The issuer has prepaid both these securities in June 2020, which were to mature in September 2020 and September 2021, respectively.

Earlier, Franklin India Ultra Short Bond Fund & Franklin India Dynamic Accrual Fund had fully repaid their borrowings and are cash positive. As of June 30, 2020, Franklin India Ultra Short Bond Fund has 13% and Franklin India Dynamic Accrual Fund has 4% of their AUM available to distribute to Unitholders.

The AMC makes it clear that they will need to wait for the completion of the e-voting exercise and the unitholders meet before they can start returning money to investors in these schemes

The borrowing levels in the other funds continue to come down steadily. The table below highlights the reduction in borrowing through June 2020.

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Borrowing levels continue to reduce

Santosh Kamath’s podcast

The mutual fund house has recorded a podcast from Santosh Kamath, CIO, Fixed Income, Franklin Templeton MF to answer investors’ queries. “We recently recorded a podcast with Santosh where he has touched upon a wide array of topics including an update on the current state of the fixed income markets, particularly with regards to “AA” and “A” rated bonds, volatility in the NAV of the six schemes under winding up, and the rationale for some of the investment decisions made in the past” , says the release.

You can find the podcast titled ‘ In conversation with Santosh Kamath- MD & CIO, Franklin Templeton Fixed Income, India’ on Youtube.

An update on cases filed against Franklin Templeton

On July 8, 2020, the Karnataka High Court considered the matters related to winding-up of six debt schemes of Franklin Templeton Mutual Fund and issued notices to the concerned parties. The parties are directed to file counter affidavit / statement of objections and rejoinder, if any, by July 22, 2020 and July 29, 2020 respectively.

The next hearing is scheduled on July 15, 2020 and the Court may record the progress made in the transfer of Writ Petitions filed before the Hon’ble Madras High Court to the Hon’ble Karnataka High Court. The e-voting and the unitholders meet continue to remain suspended till the AMC gets further directions from the Hon’ble Karnataka High Court and active monetization of assets of the schemes and distribution of investment proceeds to the unitholders will be possible only after successful e-voting.

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