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Franklin Templeton provides an update on winding up of 6 Fixed Income Schemes

Posted On: 2020-09-29 11:15:10 (Time Zone: IST)

Sanjay Sapre - President, Franklin Templeton Asset Management (India) Pvt. Ltd. has shared a factual update on the latest developments related to the six fixed income schemes under winding-up. There were media reports pertaining to a First Information Report (FIR) filed with the Economic Offences Wing (EOW), Chennai.

The Hon'ble Karnataka High Court has completed hearing the arguments on matters related to the six schemes under winding-up. Franklin Templeton awaits the judgment from the Hon'ble High Court. The company's focus remains on maximizing value for unitholders in these schemes and returning monies as soon as possible in accordance with the applicable regulations, subject to the decision of the Hon'ble Karnataka High Court.

Sanjay has asked investors to not believe the un-substantiated rumours and baseless accusations. He didn't comment on the First Information Report (FIR) as he has not seen its contents, it may be noted that filing of an FIR is simply the preliminary step in an investigation. Since the business has been carried out in compliance with the applicable laws and all decisions were taken in the best interest of our unit holders, the company is confident about the outcome of any true and fair investigation conducted in this regard. The company has utmost respect for all statutory authorities including EOW, however it believes that Securities and Exchange Board of India (SEBI), the specialized regulator for the securities market, is best placed to handle any issues related to mutual fund investments.

The press release issued by Chennai Financial Markets and Accountability (CFMA) citing the FIR, is replete with various misleading and baseless allegations, besides being inappropriate, as the matter is currently subjudice. The company is not aware of the antecedents of CFMA and as admitted by them in their original complaint, none of their members were unitholders in the six impacted schemes.

Mutual Funds are well regulated, and assets of these schemes are held with independent SEBI registered custodians. Portfolios of these schemes retain value according to their respective NAVs, which are published daily based on the valuation of two reputed independent valuation agencies. The company has already communicated the reasons for winding up (specifically the impact of the Covid-19 pandemic) and request investors not to be swayed by unverified or speculative reports in the media.

The books of the six impacted schemes are regularly audited by internal auditors, statutory auditors, auditors appointed by the regulators etc. and none of them have ever made any observation regarding misutilization of funds by the schemes.

CFMA has previously made similar misleading and baseless allegations against the company and the industry - for example, suggesting that unitholders in the scheme may face up to an 80% haircut, or that winding up of schemes by Franklin Templeton will lead to substantial losses for unitholders across all debt schemes in the industry. He reminded that since April 24, 2020, the schemes under winding up have received over INR 7,184 crore from maturities, pre-payments, and coupons. Four out of the six schemes are already cash positive. As a reminder, these amounts have been generated without the ability to efficiently monetize the portfolio. He felt the above helps to assuage initial concerns some of the investors may have had based on incorrect reporting that took place around large hair-cuts that investors may face in these funds.

He assured the unitholders that they continue to follow due process, both in making investment decisions and in the winding up of these schemes. The company has acted in the best interest of the unitholders and in accordance with all regulations in this regard. The focus remains on maximizing value for unitholders in these schemes and returning monies as soon as possible in accordance with the applicable regulations, subject to the decision of the Hon'ble Karnataka High Court.

The company continues to receive monies from coupons, maturities, and pre-payments in all the six schemes. These details are also published in its website every fortnight as well as communicated to the unitholders. The company continues to follow due process, both in making investment decisions and in the winding up of these schemes. The company continues to cooperate fully with all regulatory authorities.

He re-affirmed company's focus on returning the maximum possible value to all investors in the shortest possible time. He also thanked the investors for their continued patience and co-operation.

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