MUMBAI, February 4: Canbank Mutual Fund has announced that its Canpremium scheme will be made open-ended shortly. The scheme, which was launched as an income-cum-growth scheme in May, 1991, was redeemed on January 31, 1998.Canbank Investment Management Services, the asset management company (AMC), had written to the unitholders earlier, seeking their consent for making the scheme open-ended. The AMC also has plans to change some of the fundamental attributes of the scheme.
The AMC conducted a postal ballot at the end of which over 50 per cent of the investors in the scheme had opted for the rollover of their investments. It may be recalled that the scheme had received a good response from high net worth investors, institutions and corporates and the initial corpus was Rs 509.20 crore which was collected in just two days from 55 investors which included ONGC. The redemption price for those opting out of the scheme is Rs 16,905.31 for every Canpremium unit of a face value of Rs 10,000. The trustees of thescheme have proposed the conversion into an open-ended scheme at the net-asset value (NAV) without any exit load.
Meanwhile, analysts point out that Canpremium has also gone the Canstar way, the only difference being that in the case of the former, the AMC has resorted to the open-end route. The life of the fund, which was to have been initially redeemed on December 31, 1996, was extended.
The face value, which was Rs 1 lakh at the time of the float, was reduced to Rs 10,000 on listing. A balanced fund, the scheme was caught in the trap of promised returns. The fund had promised to repurchase the units on completion of three years, four years and five years from the date of allotment at Rs 15,150, Rs 17,400 and Rs 20,000, respectively. The fund performed well till the third year after the launch, in line with the performance of the Sensex.
During the first year of repurchase, the NAV started rising well above the minimum repurchase price, peaking at Rs 20,668 on September 15, 1994, which coincided withthe Sensex touching a high of 4,600. The fund decided to repurchase at a price much more than the minimum repurchase price of Rs 15,150. During September, 1994, it repurchased the units at Rs 17,794.
With the stock markets taking a bearish turn, the fund's NAV gradually declined in the second year of repurchase to Rs 16,127, going well below the minimum repurchase price of Rs 17,400. The prolonged bear phase saw the suspension of repurchase during August, 1995. Apart from the extension of the scheme by a year or so from 1996, the repurchase clause was altogether done away with. The current NAV is at around Rs 7,252.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
