th. The outcome of the voting will determine if the schemes must close down or not and how soon unitholders will get their money back. ET takes a look at the options for unitholders of the six schemes:
Which are the debt schemes in question?
There are six debt schemes for which e-voting will be held. These are 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, Franklin India Income Opportunities Fund.
How will the consent e-voting process work?
Consent will be sought for each of the six schemes separately. Unit holders will have to vote separately for each of the schemes. Due to prevailing conditions and limitations on travel and gatherings on account of the COVID-19 pandemic, approval from the unitholders is being sought through electronic means.
Who can participate in the e-voting?
If you are a unitholder in any of the six schemes mentioned above, you can vote. Each unit holder will get one vote for the scheme in which they hold units.
When will the voting begin?
The e-voting for unitholders’ voting will begin at 9 AM on December 26 (Saturday) and go on till 6 PM on December 28 (Monday). This will be followed by a video conference on December 29 where unit holders of six schemes can participate and will get a chance to question trustees on their decision to wind-up the schemes. Unitholders can also vote during this meeting, but there is a cap of 2000 attendees for the video conference.
What are the choices for investors in the voting?
If you vote with a “Yes”, it will mean opting for an orderly winding up of the schemes and there will be a potential to realize fair value from the assets. This will also allow the Trustee to proceed with the next step which is to seek further approval from unit holders for appointment of a person to carry out the winding up. Once this happens, the proceeds realized by the Scheme will be distributed to the Unit holders in proportion to the units held by them, at regular intervals. Financial advisors to most unitholders in the six debt schemes are recommending this option.
If you vote with a “No”, it will mean opting for the schemes to be reopened for purchases and redemptions. Financial planners fear that there could be a rush of redemption requests from many investors requiring the schemes to undertake an emergency liquidation of portfolio securities. Such a distress sale of securities held in the portfolios could result in a rapid and steep decline in the NAV leading to substantial losses for unit holders.
What happens after the voting is over?
The court has directed SEBI to appoint an observer to oversee the voting exercise. The results of this vote along with the report of the observer shall be submitted in a sealed cover to the Supreme Court. Any redemption in the six fixed income schemes will continue to be stayed till the next date of hearing in the third week of January 2021.
How will the outcome of the voting be determined?
As per the order of the court, the outcome of the voting exercise would be decided by a “simple majority”. Simple majority here means more than half of the votes cast.
When will the second unit holder meeting be held?
The unit holder meeting on 29 December 2020 will focus on the ‘consent’ vote to wind up the schemes consented to .The next unit holder meeting will be for investors to choose the authorized person and they can choose between the Trustees or Deloitte who will take steps to monetize scheme assets, repay scheme liabilities and return money to Unit holders. The second meet will be held only for those schemes which receive a positive consent for winding up.
How soon can Franklin Templeton’s unitholders expect their money back?
It is only after the results of the second vote, unit holders of cash-positive schemes will start getting their money back. So, even after a ‘yes’ vote, investors will have to wait for the second vote to start before getting their money back. This money will come in instalments to them.