Franklin Templeton Mutual Fund on Monday said that it has sought the consent of unitholders for the orderly winding up of its six fixed income schemes. Electronic voting to seek their approval will take place between December 26 and December 28 and the meeting of unitholders of relevant schemes on December 29.

The fund, however, warned investors that if the decision to wind up schemes in an orderly manner is not implemented, “it would precipitate a rush of redemptions, which would force a distress sale of the portfolio securities, likely resulting in a reduction in the net asset value (NAV) of the schemes and substantial losses for unitholders’’.

Franklin Templeton MF had wound up the six debt mutual fund schemes on April 23, citing redemption pressure and lack of liquidity in the bond markets. The 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.

In the voting, the unitholders will have to take a call on whether to give consent to the winding up or withhold it, which would allow the schemes to reopen for purchase and redemption.

The latest move comes after the Supreme Court last week asked Franklin Templeton MF to initiate steps within one week for calling a meeting of unitholders to seek their consent for closure of the six mutual fund schemes.

Franklin Templeton MF said the objective of the voting exercise is to seek, by “simple majority”, consent of the unitholders for the decision made by the trustee of the fund house. Consent will be sought from unitholders for each scheme separately.

Franklin Templeton MF believes that it will be beneficial for unitholders to vote ''Yes'' to the proposed resolution as this will allow schemes to monetise assets without resorting to distress sales and will maximise value to them.

From April 24 to November 27, the schemes under winding up have received over Rs 11,576 crore from maturities, pre-payments, and coupons. Out of this, the schemes have received Rs 2,836 crore in the month of November itself. The cash available stands at Rs 7,226 crore as of November 27 for the four cash positive schemes, subject to fund running expenses.

`We seek unitholders’ consent for the orderly winding up and believe this will result in the best possible outcome for unitholders in these schemes. "Unit-holders'' vote in favour of the orderly winding up will allow us to maximise return of investment value without resorting to an emergency liquidation of securities. The opportunity to liquidate assets at fair value will increase with time in a normal market environment’’, Sanjay Sapre, President, Franklin Templeton – India, said.

He assured that an orderly winding up does not mean a lengthy wait for return of money. Here he added that once the fund house receives a majority “Yes” vote in favour of the orderly winding up of the schemes, it will immediately proceed with a second vote to seek approval of the unitholders to authorize the trustee, or any other person, to proceed with winding up of the schemes.