MUMBAI, Jan 28: SBI Mutual Fund is launching a five-year, close-ended, assured return income scheme known as the Magnum Monthly Income Scheme 98 (1), on February 3. Addressing a press meet to announce the launch of the scheme on Wednesday, the managing director of SBI Funds Management, Niamatullah, said that the asset management company will be offering an assurance for the return as well as the principal amount. Moreover, the return is guaranteed for all the five years of the life of the scheme.The scheme is offering four options of return - monthly, quarterly, annually and cumulative growth. Under the monthly option the return will be at the rate of 12.5 per cent per annum payable monthly. Under all options, the annualised yield works out to 13.24 per cent.
The payment to be made to the scheme, in case of a shortfall at the end of the closure of a financial year, would be by way of a funded guarantee which would be returnable to the extent that the scheme performs in future, and such that the NAV ofthe scheme is higher than the guaranteed face value of Rs 10 at the close of any financial year. The investment pattern is such that not less than 80 per cent of the monies will be invested in debt instruments at any given time and the remaining will be distributed between equity and money markets. Niamathullah said that he was sure that the design of investments would be enough to ensure that the returns promised would be payable without any strain on the asset management company (AMC). The net worth of the AMC is currently around Rs 45 crore.
Moreover, SBI Mutual Fund hopes to garner around Rs 300 crore through this offering. The minimum amount specified in the offer document is however only Rs 50 crore.
The AMC will also not charge any management fee or additional fee in the first year. From the second year onwards, the AMC will charge a management fee of not more than 1 per cent of the average weekly net assets. The scheme is a no-load one and the AMC will charge an additional fee towards recovery ofinitial issue expenses from the second year.
The capital invested in the scheme will be protected only at the time of redemption. At other times, repurchases will be done at NAV-related prices.
Liquidity is available in the form of repurchases after the first year. However, under the cumulative growth option where a sum of Rs 10 will become at least Rs 18.62 on redemption, repurchase will be available only at the end of three years.
It might be mentioned that SBI Funds Management has paid Rs 60 crore by way of meeting shortfalls at the time of redemptions of two schemes in the past.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
